"Greg Frey" <gregfrey[at]patmedia.net> wrote in message
news:d87ba9e3.0401200700.6e2a24b7[at]posting.google.com...
- quote -

Conventional Wisdom says to buy term for temporary needs and permanent
insurance (whole life, universal life, variable universal life) for
permanent needs.

The is often followed with archaic advice that says that items like
mortgages and debts are temporary. Why is that advice archaic? The law now
prohibits discrimination in lending based on age. Last year, I wrote life
insurance to cover a mortgage on men and women with ages such as 68, 73, 77,
84. In the past, banks wouldn't make these loans, but now they have to. At
older ages, term isn't available for new issue.

Most of the contention between whole life and term life has to do with
potential investment returns if one invested "the difference" between the
two in a side fund. On paper, when one is young, this appears to favor term
insurance, although I've never seen ANY lay author or armchair advisor run a
stochastic analysis to support their theory. They rely solely on
deterministic analysis, which is guaranteed to be faulty. For example, any
comparison between whole life and a stock mutual fund is faulty. This
assumes that everyone has the same risk tolerance, same risk capacity, same
tax bracket, same needs. An analysis can be performed on a case by case
basis, with results covering the entire spectrum, which totally destroys any
"one-size-fits-all" argument, so be extremely wary of anyone that tells you
automatically one way or another. Life just isn't that simple.

Some of the less than obvious reasons why death benefits are needed on a
permanent basis:

1. Social Security "Blackout Period" -- When a surviving spouse has no kids,
or after the kids are age 16 and up, the surviving spouse receives ZERO from
Uncle Sam, until age 60, when he or she can apply a whopping 2 years early
for the reduced Social Security retirement benefits.

2. Social Security Retirement Benefits are reduced by 50% when the primary
insured dies, often leaving many widows wondering how they are going to pay
their bills.

3. Defined Benefit pensions ALWAYS pay a reduced benefit if one wants to
include a spouse in the benefit equation. A permanent death benefit
solution, properly structured, can actually maximize retirement incomes, AND
provide for higher incomes to the survivor. Defined benefit plans are coming
back, after two decades of slowly disappearing. Most government entities
have maintained theirs over the years (civil service, military, federal).

4. Estate taxes -- they aren't going away, they are actually getting worse.
The "death tax" gets some press, but other taxes don't even get mentioned,
even though they affect more people. The Federal Estate Tax Credit to States
for their Estate Tax -- the "sponge tax" -- is being phased out. States are
already short on funds, so they are enacting their own estate taxes. For
example, Kansas taxes estates starting at $700,000, NOT $1,500,000 as the
Federal Government does today. Plus, we have an inheritance tax starting at
$30,000. Outside of attorneys and accountants that specialize in the wealth
transfer areas, I find many who aren't even aware of these taxes. For that
matter, most insurance agents don't know, either. Food for thought -- The
Estate Tax predates the Income Tax in this country by about 100 years. It
has been repealed a handful of times, only to reappear a few years later,
more complex and with higher rates than ever before.

5. Many couples aren't marrying anymore. People who are already divorced,
often postpone marriage indefinitely, even though they may enter into shared
living arrangements. The traditional family unit is now less than 25% of
households in the USA (source: US Census). Unmarried couples do not receive
the same tax benefits when one partner dies as those who are married, even
though they may intend for their significant other to receive an
inheritance. Proper planning can deal with this issue, but failing to plan
often results in extraordinary problems, including expensive litigation.

6. Business Continuity/Succession Planning -- this is often overlooked by
small business owners, and their advisors. The segment of the population
that is self-employed is growing again, and may one day be larger than the
segment employed by someone else. It is common that some, but not all, of
heirs want to continue the business, upon the death of the owner/founder.
Making an estate 'equitable' (not necessarily equal) with intentions spelled
out, and promises funded, makes for an easier transition, with the lowest
toll. Fail to plan, and families will divided and fight, with tragic
results. These needs are rarely temporary in nature.

7. Special Needs Children -- One of the benefits of modern medicine is that
offspring that used to die of natural causes now live much longer, often
approaching normal lifespans. Death benefits to care for dependent children
normally disappear when the children are grown, but in the case of an heir
with health or mental issues that are permanent, requires a permanent death
benefit solution.

Questions? Comments?

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

gregfrey[at]patmedia.net (Greg Frey), you asked:

<< <i> Is there a tutorial somewhere on the net that can give me the pros and
cons of whole life versus term life insurance? Maybe someone here can
point me to an FAQ or beginner's tutorial of somekind. I'm having a
difficult time figuring out which is the best choice for me.</i> >
Well Greg, there are a lot of sites that sell life insurance that can give you
some good information. However, that type of site may not be what you're
looking for. So, you might try your state's Insurance Commissioner's web site
and many of them provide some of the help you're seeking. You might try the
following sites as well:

http://info.insure.com/life/basics.html

http://www.insurance.ca.gov/docs/FS-Agntsbrk.htm

Just remember this, the pros and cons have a LOT to do with how you intend to
apply a particular type of life insurance. So, you need to have some clear
ideas as to what specific issues you have for YOUR planning of your short term
and long-term goals and your finances. Most often this requires some help from
a professional who has good experience to help you think of things you may not
just on your own.

But, before you even seek a professional out, doing what you're doing is a good
idea. Gather as much information as you can and then when you sit down with
such a professional you can focus on the details of setting up what you want
vs. spending a lot of time learning the basics and maybe being confused as to
what you want.

Beside these two web sites, I would highly recommend either going to the
library or buying a couple of good books: Ernst & Young's Personal Financial
Planning Guide, by Ernst & Young; and The New Life Insurance Investment Advisor
by Ben Baldwin. In just these two books alone, I feel you'll get much more
than you might expect. And with a much better understanding, you'll better be
able to make well-informed decisions.

Note: Always keep in mind that when looking at term vs. whole life or other
permanent types of life insurance, it's often not and either or issue. You can
have both and in a great many cases, it's advisable to have both - just how
much of each or whether it should be just term depends on one's set of issues.

"Greg Frey" <gregfrey[at]patmedia.net> wrote in message
news:d87ba9e3.0401200700.6e2a24b7[at]posting.google.com
Hi

Is there a tutorial somewhere on the net that can give me the pros and
cons of whole life versus term life insurance? Maybe someone here can
point me to an FAQ or beginner's tutorial of somekind. I'm having a
difficult time figuring out which is the best choice for me.

Thanks

Greg

Hy Greg;
I do NOT want to sound trite, but it will be almost impossible to get an "un-biased opinion" on the
age old Term vs. Permanent Life question. All of us, including those that write books about it, have our own DEFINITE opinion on which is best.

The clearest answer that I can offer, is that they are BOTH excellent "TOOLS" when use correctly.
Term insurance (in any of it's many forms) is ususally cheap to buy, but EXPENSIVE to own, IF you keep it in force for any length of time. As the name implies, it is only operational for a TERM (a number of years).
Therefore, IF you have a "specific" need for Death Coverage that will only last a SPECIFIC time, then term insurance is the best tool to use.

If however, you are looking to purchase LIFE INSURANCE that WILL be in effect "no matter when you die", then some form of permnanent life is required. (btw, whole life is only one of the many forms of PERMANENT Life Insurance).

If you wish to discuss it further, contact me
cal-lester[at]comcast.net

Hi

Is there a tutorial somewhere on the net that can give me the pros and
cons of whole life versus term life insurance? Maybe someone here can
point me to an FAQ or beginner's tutorial of somekind. I'm having a
difficult time figuring out which is the best choice for me.

Thanks

Greg