No, term life is pure insurance. I compare it to renting an apartment. You live there but you have no equity. Term is good for a young family with a large insurance need. It can help pay a mortgage or other debts if you die prematurely. Term insurance is generally lower priced than whole life, initially, but when you look at the costs over time a whole life policy is far less expensive and will be available when you are likely to need it most. I always recommend a combination of whole life and term depending on the needs of my clients.
Some term life insurance plans do accumulate a residual value but not in the traditional sense of a "whole life" or permanent form of life insurance.
Term life insurance plans that have a return of premium provision (ROP) accumulate cash surrender value. You are usually not allowed to borrow against the reserve, but it is refunded to you at policy surrender according to the provisions in your policy.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
There are term policies that accumulate cash value. Most do not. Those that do accumulate cash value do so to provide an end of term cushion or incentive. The product with which I am most familiar uses the accumulated cash value to offset the steep increase in premiums for the years following completion of the term. This could be valuable if the insured’s life expectancy is short and the need for insurance remains.
President, The Firm of Steven H. Kobrin, LUTCF, 6-05 Saddle River Rd #103, Fair Lawn, NJ 07410
Yes, some do.
Back in the olden days they were term policies in which dividends were paid.
They date back almost to the days of the covered wagon and are probably just as rare :)
Today we have term products with a return of premium feature. The idea is that if you outlive the term guarantee, you get all your premium back.
Of course, you have to pay a lot more premium for this added benefit.
Is it worth it? It all depends on your ability to save on the side and reimburse yourself from your own fund.
But it also depends on your philosophy regarding life insurance.
I’ve always maintained that cash value is secondary in life insurance. The primary value of this product is the survivor benefit. The exact amount of money your heirs need is provided exactly when they need it. And every dollar of that benefit costs pennies in premium. It is quite a deal.
If on top of that, do you want to grow some cash on a tax-favored basis, go for it. But just make sure that the survivor benefit remains intact.
I would recommend a Term policy with a return of premium provision (ROP) if you wish to accumulate a cash surrender value. In most cases you are not allowed to borrow against the reserve, rather it is refunded to you when you surrender your policy based on the provisions in your policy
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Term life insurance plans that have a return of premium provision (ROP) accumulate cash surrender value. You are usually not allowed to borrow against the reserve, but it is refunded to you at policy surrender according to the provisions in your policy.
Back in the olden days they were term policies in which dividends were paid.
They date back almost to the days of the covered wagon and are probably just as rare :)
Today we have term products with a return of premium feature. The idea is that if you outlive the term guarantee, you get all your premium back.
Of course, you have to pay a lot more premium for this added benefit.
Is it worth it? It all depends on your ability to save on the side and reimburse yourself from your own fund.
But it also depends on your philosophy regarding life insurance.
I’ve always maintained that cash value is secondary in life insurance. The primary value of this product is the survivor benefit. The exact amount of money your heirs need is provided exactly when they need it. And every dollar of that benefit costs pennies in premium. It is quite a deal.
If on top of that, do you want to grow some cash on a tax-favored basis, go for it. But just make sure that the survivor benefit remains intact.