A Personal Finance Blog for Malaysian: Buy Term Life, Invest The Difference

Thursday, August 12, 2010

Buy Term Life, Invest The Difference

Many research indicates to “Buy term and invest the difference” which is what I plan on doing. But I’m still curious, if the wiser choice is to buy term, then:

Who actually buys whole life? Why?

Reply from someone, very interesting.

A rule of thumb:

When you select TERM insurance, you are RENTING the coverage.

When select a whole life policy, your are BUYING the coverage.

You have to decide what type of coverage is right for you.

Keep in mind that TERM rates increase annually or in increments (5 year, 10 year, 20 year, 30 year) and at some point, the rates will be higher than you will want to pay…so, you go without it.

Most folks get the idea of “I’ll buy term and invest the difference” yet they fail to “invest the difference” and as they get older, with the increase in the term insurance, they have LESS to invest.

With whole life insurance, the payments will stay the same for the entire period. Not a bad deal for youth as it keeps the cost of life insurance low, and protects their “insurability” in the future.

Good luck and I hope this helps.

Click here for a case study using my own age and expectation, comparing Term and Investment-Link Product.

There is no one fixed rule for everyone, else all financial advisors and consultant will be redundant.

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