Term or Whole Life, that is the question?

Term or Whole Life, that is the question?

The Cost of the Death Benefit over your lifetime might just surprise you!

Most people try to find a life insurance policy that costs them the least amount of money for the highest amount of death benefit.

When one truly understands life insurance, you will look for a policy that you can pay as much as you can into, for the longest time frame, with a growing death benefit as the icing on the cake. Also, this policy will appear as if it costs way more than other types of life insurance, but in actuality is comparatively cheaper.

How crazy does that sound? Ridiculously crazy right.

Some important questions need to be considered before deciding which type of life insurance suits your needs most, Term or Whole Life.  I have created a list of questions you should answer before deciding which really does suit your needs most, as both types of insurance are necessary for different reasons. The actual cost of the death benefit over your lifetime just might surprise you.

Ask Yourself and Answer the Following…

1/ Do I want my death benefit to;

a. last my whole life (to age 121) so it will actually be there when I pass away and be passed on to my beneficiaries or

b. not be in-force for my entire lifetime and therefore possibly end before I pass away so my beneficiaries receive nothing?

a. __   b. __

2/ Do I want the cost of my insurance to;

a. increase as I age or

b. stay the same and even be paid-up after a reasonable period of time, say maybe 10 years?

a. __   b. __

3/ Do I want my premiums to;

a. increase over time or

b. stay the same, or

c. decrease over time?

a. __  b. __ c. __

4/ Do I want the amount of my death benefit to;

a. stay the same

b. decrease over time or

c. grow over time?

a. __  b. __  c. __

5/ Do I want my life insurance policy to be;

a. a living benefit I can utilize while I am alive as well as have the death benefit protection or

b. be just a death benefit that others benefit from after I am gone?

a. __  b. __

6/ Do I want safety assurance so I know for certain that my death benefit will;

a. last my entire lifetime and so be there when it is needed, up to age 121

b. become unaffordable as I age so when I am most likely to pass away I will have to drop it or

c. **have the possibility of lapsing even though all the premiums are paid on time?

a. __  b. __  c. __

7/ Do I want my life insurance to multi-task my money, so also be;

a. my emergency fund, pool of capital for lifetime financing needs and possible supplement to retirement income, or

b. provide a death benefit only?

a. __  b. __

8/ Do I want to find a

a. safe haven, with tax advantaged, guaranteed growth of my money while providing a substantial and growing death benefit or

b. provide a level death benefit only?

a. __  b. __

9/ Do I want my policy to be with a company that has;

a. been around for over 100 years and has been growing, even over the last 10 years or

b. a company not yet tested by the forces of time?

a. __  b. __

10/ Do I want to own the properly designed for banking policy from the one insurance company that has totally embraced infinite banking so;

a. I can earn tax-free dividends because it is a Mutual company or

b. be with a Stock company where stock holders earn the dividends that they have to pay taxes on?

a. __  b. __

11/ Do I want to care more about the ratings of the company if they are provided by

a. third party companies that insurance companies can pay to get the rating they want or

b. the rating that the actual insurance industry commissioners created to make sure their strict regulations to protect the death benefits of the policy holders are being adhered to?

a. __  b. __

12/ Do I want the opportunity to buy one time paid-up additional  insurance (PUA) until age 75, charged as if still at the age I was when I began the policy, which grows the death benefit and cash value, or not?

a. __  b. __

13/ Do I want guaranteed insurability?

a. so I can continue to buy life insurance, at the age I was when I first purchased my policy, even if I become uninsurable, or

b. not have that protection, so when my policy term ends, possibly not qualify to purchase life insurance protection any more?

a. __  b. __

14/ Here is the bottom line:

a. Term Insurance has one problem: It only pays if someone passes.The premium paid, if the person insured did not pass away during the term, is lost forever.

b. What if you could get every last cent of premium back at the end of the term, so you could reuse that money over and over again during your lifetime? Would that make you jump up and down for joy?

a. __  b. __


Now that you know what you are looking for, compare the examples below to see whether Term, Whole Life or both Term and Whole Life, suit your needs most.


Hypothetical example of a Dividend Paying Whole Life insurance policy with a *PUA Rider as available for a 46 year old non-smoking female through a Mutual Insurance Company.

Notice at the end of year ten, the cost of insurance (10 x $1751 = $17,510) is a little less than the available cash value. This means that your insurance is paid up at this point.

All premiums paid after year ten will be adding to the cash value, more than the actual amount of the premium paid.

Notice also the longer you pay these premiums for, the higher the death benefit grows and so the higher the cash value grows also.

Your cash value is the amount you can borrow against, using your death benefit as collateral, for financing the things of life like college or education costs, vacations, cars, business equipment, weddings etc. The savings gained outside the policy is where the true value of these policies lies. Understanding how to actually use the cash value portion of a properly constructed whole life policy is invaluable knowledge, especially for business owners.

Notice also how the premium price reduces at age 76 and is no longer paid out of pocket at age 91, which is not so when it comes to Term insurance.




Notice at age 76 the premium is $783 and the death benefit is $150,538.  At age 91, the premium is zero and the death benefit is $193,784

Some might say ‘but I won’t want to pay a premium when I am in my eighties’. Well, why not? Look closely at age 82 and 83. You pay a $783 premium but that earns a tax free dividend of $2,374. It also increases your available cash value by $4,865 and increases your death benefit by $3,217. Why stop paying premiums? I cannot think of any good reason to do so.

In fact, I believe this is why we are restricted from paying premium in the later years (from 75 on) because the benefits are so great they have had to be reduced.

Now look at the total net outlay for the 121 year life of the policy, $62,517.10 with a $350,716 Death Benefit. Please compare this with the total net outlay of the Term policy below with a $100,000 Death Benefit.


A hypothetical straight 30 year Term policy illustration demonstrating Guaranteed Insurability and Convertibility  (for the term)  through a Mutual Company for a 46 year old non-smoking female.

Cost of insurance increases every year after the Term ends. Costs jump immensely after Term ends at age 76 and must be bought as an annual renewable term from that point on. The cost becomes prohibitive each year after the 30 year term even though the death benefit does not change.

Most Term policies do not cover the period of time when you are statistically most likely to pass away. After age 98, the death benefit is not much less than the actual premium paid. Term insurance is not a for-life insurance.

What Term insurance is good for is for protecting the bread winner of young families or couples with a lot of debt. The family can be looked after or the debt paid off with the death benefit if the breadwinner or one of the couple, passes away, during that time period.

It is also invaluable for someone who might not be able to afford a whole life policy as yet or buy the amount of whole life death benefit they need right now. The whole life policies we design are for banking with. That means they start with a high amount of cash value and lower amount of death benefit. The death benefit is lower when you are younger and grows as you age, so when you will actually need a high amount of death amount, you will have it all while the cost of it goes down over time.

The correct term insurance policy will protect their insurability allowing them to convert the term to whole life no matter whether their health has become uninsurable during that time period of the Term or not.




Notice at age 76, the premium is $452 with a $100,000 death benefit.  At age 77 though, the premium is $8,849 with a $100,000 death benefit. At age 91 the death benefit is still $100,000 but the premium is up to $36,275.

$676,343 is the total net outlay to age 98, for a $100,000 death benefit.

3/ **UL

I have added this illustration not because UL policies are whole life, because they are not, but because I wanted to make sure you knew what you were getting into if you are considering buying one. Please read all the articles I have posted at the link below.

The design of these policies is an annual renewable term along side a savings mechanism which for EIUL’s is often indexed to S & P, and VUL to mutual funds.  The cost of the term almost always eats up the cash value as it increases in cost annually causing the policy to implode.

Guarantees always come with ‘if’s’ that favour the insurance companies, not the insured or owner of the policy.

UL’s do not have PUA riders that can compliment the policy either, which is one of the main driving forces of the banking policies.

The portion of a letter below was received by a client who owns a E.I.Universal Life Policy through a Stock Company. A lapse is inevitable.


You can now make up your own mind about which Life Insurance you would prefer to secure a death benefit on yourself.

Call me, Jennifer Hansen, to set up a webinar appointment today – 845-649-7487 or email me at Jennifer@DebtDiagnsosis.com

* Paid-Up Additional Insurance Rider provides:

Additional protection for beneficiaries.
Additional cash value, which can be used for policy loans or partial surrenders.
Tax-deferred values if the policy is not a Modified Endowment Contract (MEC).
The flexibility to add the rider at time of issue or at a later date (with proof of insurability).
The flexibility to use it for deferred compensation, college funding, mortgage protection and acceleration, wealth transfer and as a supplement to retirement income.
Possible dividends (although never guaranteed), which are usually paid on the amount of insurance in-force at the end of the policy year. Dividends from the rider are added to dividends from the policy.

Whole Life – with and without a PUA Rider Here are two hypothetical illustrations. One shows a base  policy over 25 years, while the other shows the same policy with an annual PUA rider for the same timeframe.

Base Coverage: Hypothetical Illustration*

Annual Premium: $10,000
Initial Face Amount: $530,384








End of Year Age Annual Payment Net Cash Value Death Benefit Annual Dividend Net Cash Value Death Benefit



1 46 $10,000 $0 $530,384 $0 $0 $530,384
5 50 $10,000 $33,117 $530,384 $896 $35,513 $537,236
10 55 $10,000 $79,558 $530,384 $2,172 $90,778 $557,753
20 65 $10,000 $183,985 $530,384 $5,491 $240,381 $633,816
25 70 $10,000 $239,362 $530,384 $7,599 $338,679 $691,453



Base Coverage, plus PUA rider: Hypothetical Illustration 2*

Annual Premium: $10,000
Initial Face Amount: $225,206








End of Year Age Annual Payment Net Cash Value Death Benefit Annual Dividend Net Cash Value Death Benefit



1 46 $10,000 $6,010 $225,206 $67 $6,077 $225,425
5 50 $10,000 $44,934 $297,406 $724 $46,998 $305,539
10 55 $10,000 $100,469 $375,450 $1,744 $109,416 $416,389
20 65 $10,000 $231,911 $500,135 $4,949 $277,077 $622,709
25 70 $10,000 $305,691 $550,888 $6,964 $384,754 $725,642



* The guaranteed net cash value grows more quickly when a PUA rider is added. By the 5th year, the guaranteed net cash value increases to more than four (4) times the annual premium. By year 10, total net cash value exceeds total premium paid on the policy that has the PUA, but it doesn’t on the base policy. By age 65, the net cash value on the policy with the PUA rider is nearly $48,000 more than on the base policy (as long as prior loans are repaid). Although the guaranteed death benefit is initially generally smaller when a PUA rider is added to a policy, by year 25 it exceeds the guaranteed death benefit of the base policy.

This PUA hypothetical is from one particular company. It does not represent what all companies offer. Contact me if you want more details about which company uses this PUA rider. jennifer@debtdiagnosis.com or 845-649-7487 Jennifer

June 25, 2011 · Jennifer · No Comments
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