Posts Tagged ‘buy term life insurance’
Is Life Insurance With Cash Value Such A Great Deal Like The Agent Said It Is?
June 15th, 2010 | Author: Steven Lo
There are mainly two kinds of life insurances: one that rips you off, and one that insures you when you really need it. The former includes all types and variations of life insurance with cash value. The latter one is the plain and simple, term life insurance.
Why is that? As a young professional who has a bachelor degree in Actuarial Science (We study to become the architects for all kinds of insurances), I would say it is because the insurance companies want to keep you buying for your entire life, and it is counter-effective for the customers to purchase lifetime insurance coverage, due to the nature of life insurance.
Life insurance is about insuring untimely death. Young families cannot afford to have the bread winners die when there are many financial needs and liabilities, so they need to insure their incomes. It is not a get rich quick scheme. The insurance company will recoup the losses from those who die early from premiums of those who live long. If the insurance company expects a policy group to live longer, the cost will be lower and vice versa. Women pay lower premiums for life insurance because their life expectancy is longer than men in the same age group.
This is why whole life insurance is more expensive. The company expects to pay you at some point, so they contribute this factor to the price formula. This one fact alone increases the price by at least 4 to 10 times! For term life insurance, the products usually insure the customers from 10 to 30 years, when they are still young and healthy, so the companies charge much less as they expect them to live beyond the coverage.
Another huge factor that makes life insurance with cash value so expensive is the cash value feature. It gives insurance agents more commission.
In one of my articles, I have outlined all the pitfalls of cash value life insurance, and mental detours that insurance salesman imposed on customers. There were also numerous cases where customers found out the problems of some of the newer versions of cash value life insurances, such as the Variable life insurance, only when their policies got very expensive and they couldn’t afford the cost anymore. You can find the link to that article in the below.
Want to find out more about how to save hundred of dollars on your life insurance?, then visit my other page on how to choose the best life insurance that put your money back to your hands.
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