Life Insurance

I recently began listening to the Dave Ramsey show and I love most of his advice. For those of you that don't know who he is I would suggest checking out his site at www.daveramsey.com He tells people how to get out of debt and start saving for their dreams. As I was listening to his show today he was speaking with some of his listeners about life insurance and he kept bashing the idea of whole or permanent insurance. I want to take a minute to explain the difference between term and permanent life insurance.

The way I like to describe the two types of life insurance is by comparing them to renting vs. buying a home. There are pros and cons to each situation and there are circumstances where one may be a better option than the other. Term life insurance may be purchased for a certain amount of time, a term. Usually they are sold for 10, 20 or 30 years. Your premium will remain the same for that term and then when the term is up you will need to buy a new policy. The biggest positive to this type of life insurance is the lower price. It is comparable to renting, you pay less than if you bought the house.

Permanent life, sometimes called whole life or universal life, is more like buying a home. These policies will remain in effect until you stop paying your premium or until you die. Just as buying a home has certain fee's that renters don't have (property taxes, realtor fees, utilities, etc..) permanent life insurance has some fee's that term life does not. On the other hand permanent life insurance has some of the benefits of home ownership that term or renters don't. Some permanent life insurance policies will build a cash value which is similar to equity in your home. These cash value accounts are usually invested and can earn or lose money just like your home equity. The biggest positive to this type of insurance is that the policy will be good for the rest of your life and your monthly payments usually remain the same the rest of your life. So if you became uninsurable due to an illness like cancer you wouldn't be able to buy insurance but your permanent life policy would still cover you.

Why do people like Dave Ramsey hate permanent life insurance? I have been asking myself this question lately because I sell both types of insurance and I think that there are circumstances where permanent is better and there are circumstances where term is better. I mentioned that I like Dave's advice but I don't like the fact that he makes broad generalizations about something as important as life insurance. If you listen to him or others they will sometimes tell people that renting is better. We all think that buying a home is better because you start building equity, why give away your money to make someone else rich, right? But, sometimes people have a lot of debt, or don't make enough money to buy a home, even if they can afford the monthly payment. If you don't believe me check out the Mortgage lender implode-o-meter at implode-o-meter.com. Buying a home isn't always the best way. Buying life insurance should be looked at the same way, yes it's cheaper to get term but cheaper isn't always better.

Many term life insurance policies will give you the option to convert them to permanent life insurance when the term is up. This means if you are 30 years old and buy a 30 year term policy it will expire when you are 60. At that time you will have the option to convert that policy to a permanent life policy, the downside is that now you will be rated as a 60 year old instead of a 30 year old. There is a big difference in those two prices. Many people believe in the "buy term and invest the rest" strategy. If you are disciplined enough to stick with that plan than that might not be a bad idea for you, the problem is that most of us will take that extra money we saved my buying term life and spend it on a new car, plasma t.v., cruise, (plug in your weakness), and we end up with nothing. The other myth about this strategy is that if you buy a 30 year term life policy you will have your home paid off and no debt by the time that policy expires and you won't need the insurance. Again, this sounds great but go ask your parents or your grandparents if they have their home paid off. 90% of them will tell you no and chances are if you are normal you won't either.

If you listen to the Suze Orman's and Dave Ramsey's of the world they will tell you that all insurance agents are bottom feeding scum that just want to sell you a permanent life insurance policy because they make more money. Are there some agents who do this? Probably. Are there some car dealers selling lemons? Probably. Are most insurance agents out there trying to rip you off. No. I would lose my license if I engaged in these practices, also I would probably lose all of your business if you found out I was cheating you. I don't make any money by selling someone one policy and then watching them take their business somewhere else three months later. What I'm trying to say is that everyone's situation is unique. Maybe term life is the best option for you, maybe not. My job as an agent is to understand your situation, explain to you your options and answer your questions. You should be making the decision and you shouldn't let any insurance agent, radio or t.v. personality or relative make that choice for you.

If you have a policy now from any company and would like us to review it for you we would be more than happy to do that. If you do not currently have life insurance and you are interested in a free quote give us a call at 801-796-6161 and we will take care of you. Please know that we will not try to sell you something just to make some money. We want to help you find the right policy for your situation.