I recently received an email from a reader about my article on The Grow-Up Life Insurance Plan offered by Gerber. James from Killeen Texas writes…

The only problem with this plan is that it’s a whole life insurance plan. You might consider a term life insurance plan instead, which has lower premiums, and invest the difference in a money market account or something with a higher interest rate.

As you can see, there is no shortage of controversy on this topic and there are strong arguments on both sides. Here is how the strategy James is talking about works. Let’s say you want $100,000 in coverage. That might cost you $1,000 a year for whole life insurance, but the same coverage could be as low as $125 a year for term life insurance. Many financial advisors would recommend buying term life insurance and investing the difference (in this case $875) in something that offers a higher return on your money.

Supporters of whole life insurance will argue that it’s better to lock-in a lower premium while you’re still young and healthy (premiums rise dramatically as you grow older and run into more health problems). Some other arguments are that it’s low maintenance, premiums are tax-deferred, and once your policy is paid up your monthly payments stop. The most attractive aspect is probably the fact that it’s very low maintenance. Many people don’t want to think about life insurance, they just want it to be there if they need it. Please feel free to share your thoughts on this topic…

Enjoy this article? Subscribe to the RSS feed!