by Tricia
Back when my husband was 18, his parents took out a $25,000 whole life insurance policy on him. His parents paid the premiums for some time and not too long after my husband and I got married we took over the payments. A little while after that, the policy was transferred fully over to my husband’s name.
We paid premium after premium for that policy. Back then, I didn’t question it too much. But now that I’ve been reading about personal finance, I think there is a better policy for us.
I started reading some articles about term versus whole life policies like this one from SmartMoney.com. The difference between the two boils down to this:
A term policy is life coverage only. On the death of the insured it pays the face amount of the policy to the named beneficiary. You can buy term for periods of one year to 30 years. Whole life insurance, on the other hand, combines a term policy with an investment component.
[Via SmartMoney.com]
With all of our debt, $25,000 wasn’t going to go very far. At this point in our life, we need a policy where you get more bang for your buck if the unspeakable happens. After looking around and doing background checks on different life insurance offers at http://www.insurance-how-to.com, I found a 10-year term life policy that only costs a few dollars more per month yet will provide $100,000 in coverage. Now that will at least wipe the debt slate clean. While it would be great to have more insurance than that, for now that is what we can afford.
In some cases, whole life may be the way to go. But after careful consideration, I set in motion the application to get term life insurance for my husband. For simplicity sake, I went through the same company that I got my life insurance from (Gerber). I sent out the payment and got the official papers so then it came time for my husband to call his whole life insurance policy.
He made the call and a few days later we received the paperwork that needed to be signed and returned. In that letter, we found out approximately how much money we will be getting by cashing out the policy…a little over $1,200. They also refund some of the premium that you paid so the total amount will be closer to $1,300. Now we are just waiting for the check.
It’s exciting that we will be getting a minor windfall. Oh, how we would have blown that on frivolous junk back then! Not anymore, though. Only just now I realized I could satisfy my LCD TV obsession with that money but I don’t even want to do that. Nope. It goes straight towards our debt and maybe a little towards our savings.
So now both my husband and I have $100,000 term life insurance policies and we are still making progress towards getting some financial security. We’re on the right track 😉
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I too think that life insurance is very useful … help the next generation for the costs of education also
You could also sell the whole life policy (see – life settlements / viaticals). But be careful! Life insurance companies have always been reluctant to allow people to own and be the beneficiary on the policies of someone who is not related or does not have some other equitable interest in the insured, because of the possibility of mischief and the bad publicity that may result from that.