Term vs Whole Life Insurance

Life insurance is incredibly important when it comes to making sure our loved ones are left behind in safe hands in the wake of our death. However, the nuances between the varierty of insurances available can often make one’s head spin. It is for this reason that I will address some of these nuances in an attempt to make the convoluted and complicated world of hypotheticals easy to understand.

Here, I will be discussing both term life insurance and permanent life insurance. Term is a bit more simplistic and also boasts the lower cost. However, more of us have been exposed to whole life insurance since it has more publicity behind it.

Term Life Insurance

Term Life Insurance, as the name hints, only covers a certain amount of time, a term if you will.  Occasionally, you may hear this sort of plan referred to as “pure life insurance” since it’s really only supposed to protect your dependents. Terms can last anywhere from one to thirty years, yet the most common is 20 years. Generally, the premium does not increase or decrease throughout the contract, but of course every plan is its own and so it behooves you to make sure that that it is the case should you decide to move forward with a term plan.

For the record, you should pick a term plan for the years your dependents would be the most, for lack of a better word, dependent on you. This way, in the event that the worst happens, your family is provided for. Ideally, the payout they receive will be the equivalent of your current income so as to provide for the smoothest transition possible should you suddenly not be around.

Whole Life Insurance

This sort of plan is permanent, and has you covered from the start of the plan to the end of your life. This said, there is an investment involved that is titled the “cash value” of the plan. This cash value grows at a slow and steady pace and is tax-deferred so you won’t have to pay any percentage based on its gains. However, you can borrow money against the account or even forfeit the policy for cash. However, if you don’t manage to pay the plan back, with interest, you will decrease your benefits until you surrender the entire policy and the death benefit with it.

Frankly, as a whole, whole life insurance is more straightforward than term plans in that the numbers behind it don’t change. Yet, even though this is the case, the plans are typically more expensive, and although offering more benefits than term, they generally cause overbuying as well. Actually, as I mentioned in a previous article, this is because when we grow older we need less benefits, but as stated above, the numbers with whole life insurance plans don’t change. So even when you have less financial obligations and your kids are moved out of the house, you are still paying the same premiums.

This all said, it is up to you to decide which plan to pursue. Of course, every individual has unique circumstances that dictate which plan is best for them. In my personal opinion, you should always be sure to consult a professional before you commit to a plan, and remember to shop around. Insurance companies offer different pricing for different age groups and different policies, so make sure you weigh your options.

 

Life Insurance, Robert Taurosa, Scale

 

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Term vs Whole Life Insurance

AIG Fights For Its Life Insurance

AIG (American International Group) has been embroiled in a court case with their life insurance company, Coventry First, since last week. Stating that Coventry has been overcharging them for years, AIG is seeking reparations in the amount of $1.76 billion for damages, and the potential harm visited on the accounts of elderly employees. Accusing Coventry First of not only artificially inflating the prices of nearly 300 accounts but doing so in such a way as to conceal their dealings, AIG is not pulling punches..

Robert TaurosaIn what can only be described as a mafia-esq scheme to hide their business transactions, Coventry First’s blatant and inappropriate use of money they had no right to claim has placed more than a target on their back. Though Coventry claims the policy prices were being manipulated with AIG consent, few can deny the shady and back-alley nature of these deals. investors purchasing these insurance plans on the secondary market need only pay the premiums, and they become the sole beneficiary when the owner of the policy passes on.

Of the nearly 7.000 life settlements purchased from Coventry with a face value of $20 billion, Coventry required an additional $150 million in disguised markups and fees. AIG said it’s entitled to more than $250 million in damages, including interest, based on pretrial rulings that found Coventry liable on certain breach of contract claims. AIG is also looking to have Coventry disclose all collected fees, including legitimate payments for undisputed policies, as well as to impose triple damages under the civil racketeering statute.

It is never wise to play games with other people’s money, and Coventry is now reaping the horrible wind that they’ve sewn. Though the trial continues, the dollar amounts being tossed around in court are staggering, and can make or break whoever comes out the victor.

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AIG Fights For Its Life Insurance