Buying Life Insurance

Choosing the right policy can protect and preserve your assets for your kids without costing their inheritance

the same type of policy from at least five other companies.

Saving in a Whole-Life Policy Versus the “Buy-Term-and-Invest-the-Difference” Concept $100,000 Whole-Life Policy for a 35-Year-Old-Male Nonsmoker
(based on after-tax values)

Age

Whole-Life Annual Premium

erm-Life Annual Premium

Cash Value in Whole-Life Policy*

Money Market Fund Yielding
8%

Tax-Deferred Annuity Yielding 10% Annually

40 1968 $ 180 $  7,770 $ 10,892 $ 11,545
45 1968 $ 249 $ 21,490 $ 26,132 $ 29,338
50 1968 $ 367 $ 39,420 $ 47,315 $ 56,726
55 1968 $ 574 $ 63,230 $ 76,469 $ 98,766
65 1968 $ 1025 $ 134590 $ 168098 $ 262736
*Dividends have been used to buy added insurance. Keep in mind that the cash values exceed the premiums paid and the policyholder must pay taxes on the difference when it is withdrawn and the policy is canceled.
SOURCE: Lifestyle Planners Inc., Brooklyn, New York

Types of Life Insurance

Policy Type

Return in Cash Value

Control Over Investment Mix

Fees andService Charges

Flexibility

Tax
Treatment

Term None None Low Very flexible: Amount can be changed at will Premiums not deductible; proceeds not taxable
Whole Life Poor: Avg. 5%-7% None Not disclosed but very high Poor: Money locked into cash value Same as term; cash value tax-deferred. Interest on loan only deductible as other interest under 1986 tax return
Variable Life Varies: Tied to stock and bond markets Some: Client may choose from mutual funds managed by company High commission and service fees Average: Withdrawal of money is very complicated Same as whole life
Universal Life Varies: Tied to selected financial indexes such as T-bills None: Company sets interest rates High in first years; decreases in later years Good: Dividends can be withdrawn and premiums can be varied Same as whole life
Source: Warren, Gorham & Lamont Inc., Boston
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