Term Life Insurance vs. Permanent Universal or Whole Life Insurance – Term Makes Sense If You’re Short on Cash – September 14, 2023

Let me put it to you like this: if you’re renters, home, auto, critical care, creditors, or travel insurance allowed you to BORROW money from their policy WITHOUT a credit check or even invest money to avoid paying monthly insurance premiums, would you take it? Ofcourse you would.

Almost all insurance policies on the market today are TERM insurance policies, and most consumers of insurance feel like they’re being screwed over because when they send an insurance company money for a term, and nothing happens during that term well, and the customers get nothing back, the customer should feel like they’re being duped.

I don’t know too many people who are happy about paying for insurance; even when you file a claim, in order to get any money out of the insurance company, you must fall within the insurance company’s defined contractual guidelines to be paid out anything.

If you ask me, that really sucks, and this is where whole life insurance comes in. Now, unless you’ve been brainwashed by the whole “buy term and invest the rest” schtick which by the way sounds utterly ridiculous, especially when comprehending how Universal Life Insurance works, then you’d know immediately why there was a DEMAND for whole life insurance.

The history of term insurance revolves around people outliving their TERM insurance policies and then being UNINSURABLE. If you’re reading this and you’re in the 70s or 80s, and you fell for the whole buy term invest the difference, your insurance agent likely forgot to tell you that whole life insurance also comes with ESTATE planning.

Unless you have term-to-100 life insurance, which is also a permanent insurance product, you can’t estate plan, because there’s a chance you could outlive insurance policy.

Peddlers of term insurance will often try to paint a picture of “borrowing your own money” when referring to whole life insurance, but that’s not what’s happening; you’re not borrowing your own money; you’re borrowing the insurance company’s money and your whole life insurance policy is the COLLATERAL.

That’s the reason why borrowing money from your whole life policy is often not a taxable event; if you were borrowing your own money, you’d no longer be insured, which is NOT what happens when you take out a POLICY LOAN.

Now, because there are various different whole-life policy loans, I don’t want to generalize this post, but what I will say is that the extra monthly payments you make to your whole insurance policy doesn’t VANISH at the end of the year the way it would any term insurance policy, a whole life policy is made to be for your whole life and because you’re paying higher premiums you’re getting more PERKS.

If we use the fast food restaurant analogy, Term Insurance is your basic meal; now, if you DIE with the term insurance, your beneficiaries depending on how much term insurance you buy or qualify for, might hit the jackpot, but what’s in it for you while you’re alive? Whereas the whole life insurance policy is the super size meal,  which allows you to benefit from it while you’re still alive, and after your death, your heirs or beneficiaries can benefit from it also.

Furthermore, depending on your whole life insurance plan, you can use it like it’s your own banking system. Once you conquer the idea of the more expensive premiums with a whole life insurance plan, you can start withdrawing money from the insurance plan.

Now, as many people who use whole life insurance as a banking product will tell you, you want to always pay the annual premium in FULL, and service the debt, from the money you borrow because the money is gaining interest and eventually DEPENDING on your whole life insurance plan, the annual premiums will be paid in full.

Some of us who have been using whole life insurance as a banking system are often shocked when, one day our insurance agent calls up and tells us to stop sending an annual premium because our whole life insurance policy is paid in full.

What a lot of people who don’t understand whole life insurance fail to comprehend is that it’s actually the government preventing whole life insurance plans from being a superior product to the modern banking system.

In many ways, whole life insurance is banking with a death benefit. When you have whole life insurance, if you don’t want to, you never have to take out a policy loan, just like if you’re in a bank; if the bank extends credit to you, you never have to take it.

The only reason banking is superior to whole life insurance in the modern era is because of FRACTIONAL RESERVE banking, which allows banks to print money based on the assets or potential assets on their balance sheets, whereas insurance companies can not print money.

Term insurance on the flipside, is good for a TERM; the lower monthly or annual payments a person pays for term insurance are great until that individual reaches a certain age and is no longer insurable.

As it’s a term insurance product, it obviously can’t extend a term policy loan because if I’m no longer insurable, why would I pay back a term loan? Or if the monthly payments are so low, I wouldn’t be able to borrow much money from the policy.

Whole Life and Universal Life insurance are PERMANENT insurance products, and by permanent insurance products, I should point out that the only way you can lose your permanent insurance is if you do not pay the monthly or annual payments.

With Universal Insurance, it’s far more complex, but universal life insurance is better suited for affluent people who know EXACTLY what they need insurance for. For example, let’s say I inherit $25 million dollars and I’m trying to do estate planning, this is where Universal Life insurance shines brightest, as you can use your universal life insurance plan to invest, save, insure, and estate plan.

I can’t realistically write about all the different things a person can do with a universal life insurance product in this post, but it’s an insurance product that was designed because of what term insurance CAN NOT do.

Term life insurance has its place; it’s insurance for the person on a budget or a person who needs insurance now because maybe they have a family and the whole or universal life insurance policies seem too expensive.

But term insurance in MY OPINION, should never be purchased if you can afford a whole or universal life insurance policy. Unless you’re rich, you’d be better off purchasing a whole life insurance policy, I personally like the dividend-paying whole life insurance policies that encourage you to be your own banker; however, contact your local insurance agent for more information on whole life insurance, because it’s definitely not for everyone.

I only recommend universal life insurance if you’re affluent or have many assets in your name or your company’s name. Because having a universal insurance policy can be overwhelming, and most people who have universal life insurance don’t know why they have it and don’t know how to use it to their advantage.

Personally, I think universal life insurance is one of the best overall financial products ever created if you accept the idea that taxation is NOT theft. Because trust me, when you die, the government will take as much as it can from you if you haven’t properly structured your estate.

Interesting times ahead!