by Chris Funnell
There’s been a long running debate about what’s best – term vs. permanent life insurance. People who already have paid into their permanent insurance policies may doubt whether they made a wise decision.
And many people who try to analyze their insurance needs may find they’re still confused about what type of life insurance term vs perm is most suited for them.
This confusion can lead to people questioning whether to move forward with life insurance at all.
When in doubt, many people look to the advice of experts. One such financial guru is Suze Orman and this is her take on Term vs Perm. Suze Orman has mentioned in her programs that if she had a top 10 hate list of investments, it would include whole life and universal life.
She doesn’t believe that the cash value in these life insurance policies are a good investment. Suze recommends low-cost term life insurance, and investing the savings in a proven investment such as mortgage or debt reduction, children’s university funds (RESP’s here in Canada), or retirement (RRSP’s in Canada).
Dave Ramsey also has been vocal about his position on permanent insurance vs term insurance. He also favors term life instead of permanent life insurance.
In one of his examples, he points out that a healthy person in his mid-30’s, with a 2-yr old and a 4-year old, can easily take on a 20 year term life policy ($36 per month for a $500,000 policy). Assuming that this person pays down his debts before the term ends, he wouldn’t need an expensive permanent policy because by the end of the 20-years, he will have little to no mortgage to pay off and his kids are finishing college.
Jane Bryant Quinn is of the opinion that the best candidates for either term or permanent insurance are those that have family depending on them for financial security, like those who have kids and are supporting a spouse or a parent. Otherwise, there’s no real reason for anyone to get life insurance.
However, if you do need life insurance, then Jane says term life insurance makes the most sense as it’s the more affordable.
Jane only accepts the idea of permanent insurance for those who have left over money to invest after taking care of their major financial priorities – such as saving for their children’s university (RESP’s), paying off their mortgage, maxing their retirement savings (RRSP’s), and tax-free savings accounts here in Canada (TFSA’s).
What’s interesting is these three pro’s do offer varying opinions on why they prefer term vs perm.
The bottom line in choosing between term vs perm life insurance should be how long you really need insurance, and what’s affordable to you.