Our expert is Marvin Goldman, CEO of the Goldman Group in Little Falls, NJ, who has been a financial advisor for more than 35 years. Here's his take on what people should consider when deciding whether to buy term life insurance or whole life insurance.
Ask Yourself Why. "The first thing you should know about life insurance is why you're buying it in the first place," Goldman says. "Everybody knows the basics: you pay a certain amount and your beneficiaries benefit upon your death. The normal reason 'why' is because you love someone - or you feel guilty. Usually the main reason is to protect loved ones financially if something happens to you.
"Answering 'why' may lead you to saying you don't need life insurance. It's important to know why you're buying it. You should feel good about it. Life insurance is really death insurance. If you have enough assets to cover the needs of the beneficiary you have in mind, you might not need life insurance. Some people buy life insurance to pay estate taxes, so assets remain intact. Of course, you need a big estate to make that worthwhile.
Whole Life Versus Term Life Insurance. "Know the difference between term and whole life, and note that there are variations in between. You can get a lot more term insurance for less money, but it'll end at some predetermined time. With whole-life you'll probably spend more because you'll be paying over a longer time. Sometimes a combination plan works best.
"Choosing the kind of insurance goes back to figuring out why you're buying it. For example, if you're married with young children, and want financial security for your family if you get hit by a train tomorrow morning, you may want a higher ticket term policy. How long do you want it? Possibly until your youngest child gets out of college.
"There's a new product on the market - it's life insurance, with a rider that provides a certain amount of long-term care. That may be something to consider at midlife. Investigate carefully; there are a lot of caveats about what constitutes long-term care and how you qualify. For boomers, long term care is a real hot button. Many have seen their parents in trouble. It's scary. A year in a nursing home can cost $100,000.
Comparison Shop "Before you buy, know the ratings of the company, from Standard & Poors, or from Best, which does insurance reviews. In term insurance, there are considerable price differences for the same package, so you really need to shop with several companies. You're looking for price, confidence in the agent you're dealing with, and a sound, high-rated company."