Val U. D'Klient is a 35 year old Manager for the Boeing Company. He lives in Utah and makes $65,000 a year. Val and his wife Betsy have 2 children ages 4 and 2.
After using the human life value calculator, Val discovers that he needs to have insurance protection for at least $1.5 M. As responsible folks the D'Klients have decided to commit 5% of their income toward insurance premiums...about $3,500 per year or $300 per month.
Val gets a quote for Term Life Insurance at www.beaconbeneficial.com and is really excited to find out that he can get his required $1.5 M policy for only $101.76 a month!
Now if you listen to Dave Ramsey, you are supposed to take your budgeted $300, buy a 30-year Term Insurance policy for $100 and invest the other $200. But there are two problems:
- What is Val going to do about life insurance after 30 years when his term is over? Val will be 65 years old and trying to buy a new policy...not a good position?
- What is Val going to invest that other $200 a month in? He might be tempted to spend it instead.
The best solution for their family is to "blend" a mix of
Term and Whole Life coverage.
Val was smart and decided to blend his coverage by using his $300/month to buy Term and Whole Life coverage equal to the $1.5 M that he needed.
Now why is Whole Life a good idea? Here's why: IT'S PERMANENT!!!
Don't get me wrong, I love Term Life Insurance and it is a must!
But, you have to die for any of your premium dollars to be worth anything.
What happens if you out-live your 30-year term policy and reach age 65 (which I hope you do)...you get nothing except a lot older and become less qualified for a new life insurance policy.
By contrast, here is what Whole Life (Permanent) Insurance will do:
Click on the image to make it readable
Notice how...
all the numbers you want to go up, go up
and
all the numbers you want to go down, go down!
The benefits of Whole Life Insurance:
- It has a savings element which accumulates cash value and grows tax-deferred
- It might build up enough cash value to stop paying premiums by a certain age
- You can give yourself a loan from your cash value (which you don't have to pay back) on a tax-advantaged basis. (Val could take out $54,000 CASH when his kids go to college, or $113,000 CASH when he retires, etc., etc.)
- The premiums will never increase...it's permanent and guaranteed
- If you out-live your policy (say age 100) your insurance company brings you a check for the death benefit...even though you are not dead! (In Val's case his death benefit has increased to $610,000...more than his $585,000 cash loan he could give himself!)
Bottom line:
You need some Whole Life Insurance
to go along with your Term Insurance.
