I have already left instructions with my kids that if I cannot be buried the same way their father was, I am to be cremated.I do not especially wish to be cremated, but vaults cause me extreme distress. I believe God made the best recycling system in the universe for us and why mess up a good thing? When we die our bodies decay and our minerals and vitamins, etc. return to the soil and help worms (who aerate our soil), birds (who eat the worms), flowers & grass (which beautify our world and give us joy.) This is the only reincarnation I believe in. Even after we are dead we can give back to our world.

But again, it’s apples and oranges.

Whole life insurance is a form of savings, not investment.

Term, whole life, and a tax favored retirement account are all part of the financial puzzle.

30 year old male, non-smoker, $50K salary, after fed and state tax, $40K take home, feels he needs a $500,000 policy.

20 year term – $33/month, $396/year, 1% of take home
30 year term – $53/month, $636/year, 1.6% of take home
2nd 20 year term @ 50 – $115/month, 1380/yr, 3.5% of take home
Whole Life – $436/month, $5232/year, 13.1% of take home

Total costs if you don’t die:

20 year term: $ 7920
30 year term: $ 19080
2nd 20yr @50: $ 27600
Whole Life at:
ten years $ 52320
fifteen $ 78480
twenty $104640

The reason for breaking up the whole life is that most of them have some type of provision where the payments are made from the earnings after some time, typically 15 years. Of course, its not completely guaranteed, a friend who had been bragging about not having to pay insurance had to start paying again about a year ago. He wasn’t too happy about that. But even if it picks it up after ten years, you still pay more over those ten than if you insured for 40 yrs with term.

So, if you put the difference (12.1 and 11.5% respectively, then later 9.7%) into a Roth for retirement @ 4% above inflation and that your salary only keeps up with inflation, in today’s dollars if you die within the insured period

20/30 yr term: $500K + $ in Roth(e.g. $0-$144K)
Whole Life: $500K

If you die at 51 (e.g. the 21st year), (assuming 4% above inflation)

20 year term: $150K from Roth
30 year term: $500K + $ in Roth (about $147K)
2nd 20yrterm: $500K + $ in Roth (about $150K)
Whole Life: $500K

If you die at 61 and kept putting in the difference or full amount (in the case of the 20 year term having ended 11 years earlier)

20 year term: $275K
30 year term: $258K
2nd 20yrterm: $500K + $ in Roth (about $250K)
Whole Life: $500K

If you die at 71:

20 year term: $488K
30 year term: $463K
2nd 20yrterm: $447K
Whole Life : $500K

Of course I haven’t subtracted the costs of what you put into the plans, just taking the last one at 71:

20 year term: $488K – $ 8K = $480K
30 year term: $463K – $19K = $444K
2nd 20yrterm: $447K – $36K = $411K
Whole Life : $500K – $78K = $422K
(15 yr cost)

So if you live to 70 or so in this example, then die, there really isn’t a difference.
If you live into your 80s or beyond, and don’t touch the money, it’ll be worth more to your heirs.
If you die when all the insurances are in effect, and you’ve been investing the difference, your heirs make more money with term.
If you die and the term policy has lapsed, the whole life is technically the better deal.

So, the ultimate question is what’s your reality? Are people in your family short lived or long lived? Likely to die young or live until their 90s? Do you make a lot more than $50K a year and are looking for other vehicles to shelter your money? Do you have a need or desire to provide for heirs or adults with disabilities?

It also comes back to Trent’s original question, how much do you need? But also when do you need it? Many folks start single, move into having dependents, then hopefully those dependents move out and are gone and don’t “need” your support. For most people, the costs of a whole life policy (10 plus times term) mean they end up with less whole life insurance and are inadequately covered if they do die, or they can’t save in other areas and become dependant on the insurance as an investment, which it really isn’t because to collect the big bucks, you have to die.

Spending on funerals has become absurd, but for some people, the more extensive (and expensive) ritual is important for their healing. Also, if you have a family plot you may have no choice but to either pay for the vault or exile the family member to another cemetery. And I don’t know if you have priced headstones recently…

But holy mackeral- who would spend 10,000 to bury someone? That seems incredible. I know funerals cost this much, but it makes me absolutely cringe. It’s such morbid excess, and takes advantage of people at their most vulnerable. I would much rather my family take 10,000 and go on a trip they will remember forever- contributing to life instead of grief.

“If you put the same amount of money in your own investment fund, you will have MORE than half a million.”
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Actually, there is nothing written in stone that says this. Maybe you missed the 40% drop in the stock market last year.

Meanwhile, my Whole Life policy has been steadily going UP in value. That’s all besides the point though. Life Insurance is a form of SAVINGS, not investment.

“Also you don’t have to wait till you are dead to get it, you have complete control over it”
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I have control over my Whole Life policy, I can take loans against it whenever I want without having to be approved by some bank. And if I want to miss a loan payment or two, I can with no hassle because the dividends make enough to pay the loan interest.

Try that with your 401k.

Maybe you can find a nice container at the thrift store!

I’m deeply skeptical of policies other than term because of a bad experience with a nearly 30 year old universal life policy.

For that policy, the investment return that was supposed to offset the cost of insurance never materialized, so I’m now paying 50% more annually just to keep the insurance in force.

Even more frugal than DIY funeral- have your next of kin agree to donate your organs in exchange for free cremation. Most hospitals will negotiate this. Get a nice ceramic container from a boutique.

I have already asked my husband to do this. Then he can have a nice gathering of close family and friends with my paintings and photos of memories around, and my favorite music playing, in our home. (The same way we got married!) Much more personal, and he’ll only have to worry about picking up a sandwich platter.

Sound financial planning looks at many different things. Short-term, long-term, some investments should be more conservative, some more aggressive. You should have both term and permanent life insurance. The term boosts things while you are younger and still working to accumulate “wealth”, the permanent sees you through the mid- and later periods in life.

I work in the insurance and financial services industry. I will never forget about a couple, in their mid-40′s, who were clients of ours. In looking at their financial picture they were doing well in planning for retirement. Dad and the kids would have been all right financially if mom died. But mom and the kids would NOT have been all right financially if dad died. In fact, there was a gaping hole in their finances that needed to be filled with life insurance. Dad was not a believer in life insurance but eventually came to see the need for it as a way to provide for his family. They scheduled an appointment to discuss insurance options and what would be best for their situation (term vs. permanent and what $ amount etc.). 2 weeks before their appointment, dad had a massive heart attack (no prior indication of heart disease) and died. Now mom has two young teenagers to raise, a family that is grieving and in pain, no $ to pay all the bills. She needs to get back into the workplace and needs a really good job. Not such an easy thing in this economy. Life just got a WHOLE lot harder for all of them and not just for the short term.

So let’s do away with the blanket statements. It’s my experience that very little in life is black or white. There are far more shades of gray.

I think a big problem with life insurance is that so many people rely on insurance companies to tell them not only how much insurance they need, but also which are the best plans to have. Insurance companies are profit driven, and will always recommend the greatest possible coverage in the most expensive plans (universal typically).

Term really is the best for most people. The greatest need for life insurance is for young families where money is usually tight. Better a big, affordable term policy than a much smaller universal plan with high premiums and an investment provision. Once the kids are grown and gone the need for coverage decreases dramatically.

If you need permanent insurance, then you either already know that, or you need a financial planner. The vast majority of those who are accumulating wealth need term insurance or no insurance.

As for using a term policy to leave behind “what you want to leave,” I think this is a sales ploy. It’s like using your possible premature death as a lottery. You are probably going to outlive the term of the policy. You’ve paid all those extra premiums for money you wanted to leave, but got nothing from it in the end. If you want to leave an inheritance, save money and invest it.

Yes, you can keep level-term policies once the level term ends. But the premiums after the end of the level term shoot up to ludicrous levels. This makes sense, because the only person who would keep the policy, rather than replacing it with a new level-term policy (if insurance is still needed), is someone with serious health problems.

Generally, inflation is not figured into life insurance decisions. Your savings should be rising throughout the life insurance term. Thus, your need for life insurance decreases throughout the term, just as inflation decreases the value of the payout over the same period.

If you take out too much life insurance, the premium may be more than you can comfortably handle. Think about it: in a bad year, no job, trouble paying the mortgage/rent, would you let that life insurance policy lapse? If you know it’s more than you need, you’d be doubly tempted to spend the premium on something more essential. I know because I did this once.

Another mistake in the comments is thinking that a stay-at-home-mom should not be insured. Just because you do not get a salary, it does not mean that your work has no monetary value. Were you to pass away, your husband would have to hire someone to take care of the kids, do the cleaning and do the housework. Figure out how much this would cost (how much would a nanny and housekeeper be) and get life insurance for this amount.