Dear Sir,

I am about to purchase a new life insurance but debating whether I should purchase term insurance or permanent (whole, variable, universal or variable universal) life insurance.

My mother recently told me that she has been putting a $250,000 permanent insurance on me for the past decade. Tragically, however, the company from which she initially purchased the plan bankrupted and was bought over by a different company. In the course of the policy settlement, the amount of cash value was drastically - I mean DRASTICALLY - reduced from its initial promise. The monthly premium for the insurance is $250, so by now she has put something like $30,000; while its cash value now amonts merely to $3,000!!!.

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Age 26
Sex Male
Smoke? No
Place? PA USA

In any event, the majority of information (from the net and books) I have gathered suggests that term insurance might well suffice considering my current circumstances above.

It seems to me that the whole argument as to why term insurance is prefferred over permanent insurnace might be that the latter type involves too much commision fees and charges by brokers, and by the time you would withdraw its cash value (though it takes ages until its cash value equals to the premium you have paid), there is hardly any left.

Besides, by virtue of its savings component, permanent insurance may cost much more than term insurance - esp., at the beginning.

In addition, as we have experienced, should a company bankrupt, you probably won't get much cash value, or, for that matter, the insurance alltogether might go astray - risky indeed!

At any rate, I am looking foward to hearing any of your insight, comment, remark, thought, etc.
kind regards,

P.S. If I am to go with term insurance, what can/should I do with the remaining money? Any investment option??

man, you got ripped

I don't have any insurance. I really mean any.

Why have life insurance at all? To me, the idea itself sounds like one big rip-off.

Term insurance is a policy that starts at a certain point and ends at another. It has no value before or after its term only during, and only if you are using it. The most common example of term insurance is when you apply for group insurance at your place of employment. When you quit unless you go cobra the insurance expires and you are no longer covered. It has no vaule at that time. Because of that it is not an investement tool. The positive aspect to term insurance whether you buy it group or indivdually is that it generally is cheaper.

Whole life endows (matures) at 100 and has no value up until that time. Meaning unless you die you cannot gain value from it until you turn 100 years of age.

Variable life is insurance and universal life have a cash surrender value meaning that they can be sold "surrendered" to a company for monetary value. Sometimes they can be borrowed against also.

The reason most people get life insurance is to protect their family and loved ones if they pass on as opposed to a personal investment tool. Most large insurance companies are almost immune from bankruptcy because the goverment will step in and bail them out or help in times of crisis. But you can/should check the stock value of the company and the rating of the insurance company. I am guessing you went with a little self run agency which is much risker than a bigger player. But really brankruptcy in the industry are uncommon.

When u look at life insurance companies you will tend to see annuities listed too. That is because they are designed to build a cash equity fund quickly for the a person who is living as opposed to a nest egg for beneficiaries for those who might die like life insurance genereally does. I say that because I get the idea you are looking for life investments instead of nest egg for beneficiary.

We are in what is called a bear market right now. That means market growth is slowed or declined. (a bull market is the opposite). In a bear market a strong strategy is to invest in annuties, bonds, and some mutual funds depending on the funds listed. I can't post all this information it would be too long but look into each of the three..

annuties
bonds
mutual funds

Annuites are funds you pay into and than get a return plus interest at a later date. They return can be in payments or in lump sum.....
Bonds are companies borrowing from you so they owe you a debt. The debt is paid back with interest and you want to look at both the intrest rate and compound period.
Mutual funds are a mix of investments and can have all of the above in their portofolio plus stocks. In a bear market unless you really reseach the company and are familiar with the industry I wouldn't tie too much up in the stock market. It is better to save stock purchases for a bull market. But a really safe bet and one I have used in the past is look up growth rates for various cities and buy stocks in ulitity companies of high growth cities. They, unless really poorly managed, are almost guaranteed growth if the city population grows.

Start studying now about investment strategies. It is going to suck if you are 50 years plus ( I met a 62 year old woman with no nest egg last week through a friend), and are just getting into the investment game.

A last note I forgot (sorry about length of post), is your debt. If you have a set of credit cards and the interest rate is higher on them than on potential investments than it is in your better interest to pay on your credit cards than to invest because you will accrue more debt than gain equity by tieing up assets in non liquid accounts.

Find someone you know personally and trust who has investment knowledge ( a license or business degree) and read about it for a few months. There is too much info to put in a post but I hope this helps you somewhat and gives you direction. Take care.

HI all, thanks for your insightful comments:

Vslayer -
man, you got ripped

Indeed, I couln'd agree more...

Robtex-
But a really safe bet and one I have used in the past is look up growth rates for various cities and buy stocks in ulitity companies of high growth cities. They, unless really poorly managed, are almost guaranteed growth if the city population grows.

Sounds like a brilliant idea for me! Thanks!!!