So you’re in the market for life insurance and you were told you should purchase whole life. Well, before you make any decisions, there are a few reasons why you should take pause and think about it. Whole life insurance is usually what a salesperson will try to get you to invest in but there are a few reasons why it might not be the best investment for you or your family.
The first negative of whole life insurance rates is the cost. Plus the investment component of whole insurance seems to take a front seat while the actual insurance aspect is pushed aside. This is a problem when you have a pushy salesperson and a naive client. It helps to be a keen customer and to also look out for possible price hikes. Sometimes, insurance companies will charge whatever they can get away with. So always know what you’re getting into.
Sometimes with whole life insurance rates you’re not only paying for a pretty expensive insurance premium but you’re also paying to invest your money.
And speaking of investing, it takes a pretty long time to see any kind of return. Also, there’s a big difference between the projected amount of your return and guaranteed amount of your return. If you do get a return, you almost always get the guaranteed amount, which will be much lower than the projected amount.
In some cases, companies will even try to confuse you with their whole life insurance products. And even beyond that, it is the case that the people selling the insurance aren’t even exactly sure what it is that they’re selling. So if the deal seems to complex to comprehend, do not purchase it.
Many whole life policies have a surrender charge. What this means is that if you decide to cancel the policy you will have a fee to pay. Plus, if you do surrender, there will be income tax consequences on any of the earnings.
Most policies will allow you to borrow against the cash value, which seems good but in reality is not because you would have to pay interest. This is the case if you are borrowing only the original amount of money you had put into your policy and not what has been earned beyond that.
And while whole life insurance may seem, on the surface, like a good investment solution, there are many other different and better ways to invest your money. Some people use their 401K, others open IRA’s.
So look around and decide which life insurance rates best for you and your money.
Stacey Gotsulias writes for a variety of life insurance blogs.