Posts Tagged ‘Insurance policy’

Life Insurance: cash value Vs term

August 29th, 2010
Metropolitan Life Insurance New York
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All life insurance involves paying premiums over time.  If you die the insurance policy pays based upon the terms of the agreement.

I believe that you should have enough life insurance so that if you, or your partner, pass away you can live off the interest.  Assume a 4% return on your investment.
If you need $40,000/year income then you’d want to have 1 Million dollars in life insurance.
Now, cash value life insurance Vs term life insurance.
Cash Value Life Insurance has a savings component involved in the policy.  A portion of your premium is placed in a separate savings account that accrues value over time, which can later be reclaimed if the policy is ended. Premiums for cash value life insurance are typically 7-10 times higher than those of term life insurance. Other names for cash value policies are whole life and universal life policies.
Term Life Insurance covers you for a specific period of time – typically, 10, 15, 20, 30 or 35 years from when the policy starts. As long as you pay you are covered and if you die while the term insurance policy is active, your beneficiaries will receive the amount of specified coverage. They differ from cash value policies in that the  premiums do not partially go towards a savings plan and are much lower.
Stick With Term Insurance – don’t mix investments and insurance.
I believe that you should not mix your insurance and your investments.  Thus, I recommend staying away from cash value policies.  The return on investment is not typically very attractive and you will likely be able to do much better investing the difference between the cost of a term policy and a cash value policy.
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