Who Would Benifit The Least From Multi Year Term Life Insurance?
Posted October 9, 2009 – 5:13 am in: term life insuranceThe person benefiting the least is the insurance agent. He/she will not get paid much commissions. The person benefiting the most would be the person buying it since premiums are low and they can buy lots of coverage.
Would you rather leave your family with a $100,000 VUL policy or a $500,000 term policy in case you die? As the agent perspective, they are asking themselves, “Do I want to get paid $1500 off the VUL or just $600 off the term?” If you were the insurance agent, what would you want to sell?
I personally sell term insurance 100% of the time and also help families invest in various savings vehicles such as Roth IRAs, 529 plans, mutual funds, money markets, etc. If you keep your investments in a life policy, your investments will incur high annual expenses. Bundling savings and life insurance together makes no sense since you will only get one of the benefit (the cash value or the death benefit).
4 Comments
The person who benefits least is your insurance agent. The commission on term is very low, whereas on other policies, like any cash value, including VUL, the commission is generally around 1 full years premium.
You should keep this in mind when other people recommend cash value policies.
Insurance companies love term. They pay out less than 1% on term cause people hardly ever die during the term…You can always get term now and CONVERT it to VUL later.
Everyone. Don’t go term. Whether it’s a 5, 10, 20 or 30 year term… when the term ends your coverage ends. It’s the difference between renting & owning your policy. I would recommend a VUL (Variable Universal Life) which builds cash value that you can later use for what ever you like (down payment on a home, car, tuition, whatever) with out losing the value of you policy & they end up paying for themselves. So, if you buy (not rent) a VUL at 100,000 & let’s say in 20 years you build a cash value of 80,000… you can cash in the 80,000 without losing your 100,000 death benefit.
Insurance companies love VUL and Cash Value policies because the customer often pays 5-10 times more premium for 5-10 times less coverage. Pretty good deal for the insurance company, heh? Any time an insurance company can charge alot more while insuring alot less, they are the benifactors.
In majority of cases term is best choice, hands down, if you can medically qualify for it. 30 year and even 35 year term products are available with guaranteed renewal options. You’ll save thousands. Don’t buy the “own versus rent” analogy. We’re talking insurance here; not a house. It is simply a sales technique used to push the cash value product, in order for a insurance agent to make 10 times the commission.