My employer had an insurance agent give a presentation regarding life insurance and the agent gave out his business card to those who were interested in more information afterward. He was of course selling whole life insurance. I would write a post about the differences about term life insurance versus whole life insurance but there are much more qualified people than me to discuss this topic. To read a good explanation of the difference between the two, check out this post on Wise Dollar. Basically, whole life insurance will cover you for your whole life, hence the name, whereas term life will only cover you for a set term, i.e 10 years, 20 years, etc. The premiums for whole life insurance will be much higher than a comparable term life insurance policy.
When I first graduated from college, a friend of mine took a job as a life insurance salesman excuse me, he preferred “financial advisor.” He kept trying to sell me whole life insurance and explained to me the benefits of it but I wasn’t interested. I was only 22 and had no dependents, why do I need life insurance? My job provided a group life insurance policy which would have covered my funeral in case an unfortunate early demise were to befall me. He tried to explain the investment aspect to me but, I still wasn’t interested. The fees are too high and I’d rather just buy term life insurance and invest the rest on my own. Much of my arguments were based on a book I read regarding whole life insurance versus term life, and I’m glad I read it.
Fast forward to present time. I had strong feelings regarding term life insurance versus whole life, but I went to the presentation with my fellow co-workers. After the life insurance presentation, some of my co-workers were discussing the topic. One of my co-workers said that whole life insurance was better than term life because term life insurance does not cover you for your whole life. There are some benefits to whole life insurance, but they generally pertain to those with a large net worth and for those who are interested in estate planning. This was not the argument my co-worker was making.
“Why do you need life insurance to cover you for your whole life?,” I inquired. Wouldn’t a 20 or 30 year term policy be sufficient to protect you, since by then your kids will be all grown up and not dependent on you. Plus, being that we work in government, after 20 or 30 years, we would qualify for our pension so our spouse would be secure as well. My co-worker responded that the money would be used to pay for the funeral and credit card bills. She chided me for not thinking of my family. “Do you expect them to pay those expenses?,” she asked.
I told her that I would like to think that in the next 20 to 30 years, I would have been able to save up enough to cover those funeral expenses and that I’ve never carried a balance on my credit card and did not intend to do so at my death. This devolved into a discussion about credit card bills and the economy. Other co-workers joined in and said that carrying a credit card was inevitable to make ends meet since there are so many expenses and bills to pay. Their comments later seemed to imply that I must be lucky not to have to carry a credit card balance. Feeling a little frustrated and like they were ganging up on me, I stupidly blurted out that people shouldn’t carry balances on their credit cards. I mean the interest rates on credit cards are usurious, the only way they get away from charging such usurious rates is by setting up headquarters in states which allow it, and then the credit card companies can export those rates to the rest of the country. I also, regrettably, said to my co-workers that if one couldn’t pay the balance in full, then they just shouldn’t charge it. Unless it was to pay for necessities like food and shelter, why would you subject yourself to such a high interest rate. There was a bit of a silence in the conversation, and I knew I probably should have just kept my mouth shut. I should stick to venting about financial matters anonymously on this blog! Thankfully, another co-worker changed the topic slightly and said that he preferred a whole life insurance because he wanted to leave his children a large amount of money. I don’t really think that’s a good reason to pay the extra premiums either, but I just nodded and smiled.
What is your opinion regarding term life insurance and whole life insurance? Do you discuss money matters with your co-workers? And, why do people carry balances on their credit cards when the interest rates are so ridiculously high?! =)