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Numerous financial advisers and other experts propose that people purchase term life insurance rather than whole life policies. While you will find a few insurance brokers here and there who will tell you the same, most brokers who work for the larger insurance companies will tell you that a whole life insurance policy is a better idea. The reason that they advise whole life over term life insurance policies is largely that they stand to receive a bigger commission from selling these policies.

Why do insurance agents receive bigger commissions for these whole life insurance policies? Since the premiums for a permanent policy tend to be larger than those for a term life insurance policy which provides the identical insurance coverage, the agent’s commission on the sale will be higher.

So why are consumers prepared to pay these higher insurance premiums? Most often, it’s because a universal life insurance policy gains in value and this equity can be borrowed against at interest rates which are far lower than for any kind of conventional loan. These policies can also be cashed in at a future time for their cash value. The equity established in these policies over time can actually surpass the amount of the insurance policy if held for a long enough time.

A permanent life insurance policy will usually pay the bearer a return in exchange for the higher insurance premiums they pay. These returns may be in the form of dividends from the company itself or from gains on stocks and bonds which are bundled with the policy. The higher premiums connected with these policies also cover the overhead costs of administering these policies.

This may all sound like a great idea to you, and that is why life insurance companies drive their agents to sell these whole life or universal life policies whenever they can. They conclude that it’s a win-win-win situation: they win; the agent gains; and the client wins.

As it materializes, there are two large problems with these insurance policies. First, life insurance isn’t intended to be a lifelong affair. Secondly, consumers by and large do far better in terms of returns by buying term life insurance and investing the remainder in price between these insurance policies and a universal policy.

Here’s how you buy term life insurance and invest the remainder. Let’s suppose that a MetLife financial consultant comes to meet with you. He determines that you want $500,000 of life insurance, and you concur. They advise a whole life policy that would cost you $200 per month in premiums (note: I just made that number up, it’s not a real quote). So, you ask them to show you a 20-year-fixed term life insurance policy for the identical face amount. They do, and you see it would cost you $37 per month for 20 years, after which time the policy expires (unless you’ve died). You select that term life policy, and then you ask the agent to help you invest the other $163 every month into some stocks (or you get the insurance and then sign up with ING to do your own investing, or something like this scenario). At the end of the 20 year point, you should be self-insured and no longer need any life insurance in any event.

There is another choice to conventional universal life insurance policies and that is a variable universal policy, which provides a package of tax sheltered investing along with term life insurance. While this is a matter for another article, it’s something you may desire to look into.

Want to find out more about term life insurance, then visit Free Life Term Quote and get free term life insurance quotes to find the best rate for your insurance needs.

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