As a life insurance agent in Indonesia, I take on the responsibility to educate expats in the responsibility to provide for their family and loved ones in the event of their death. Life insurance is not for the insured but for the survivors of the insured. The benefit is designed to make certain that the survivors have the funds needed to pay off debt, continue to pay living expenses (income replacement), pay for college tuition and to pay for final expenses that always result from the death of the insured.
Typically, when I discuss the various types of insurance products available, the most asked question is “what’s the difference between Whole of Life Insurance and Term Insurance?” These two products will do pretty much the same thing when it comes to the basic needs of the insured. They both will provide a death benefit to the insured’s surviving loved ones and family members. They both offer coverage for a predictable period of time. They can both be paid in annually, quarterly or monthly installments. And they both offer various riders to modify the policy to fit the specific needs of the insured. The difference between these two products is what is most important. Where WOL Insurance is designed to cover the lifetime of the insured, Term Insurance is normally purchased in blocks of time such as 10, 15, 20, 25 and 30 years. WOL Insurance builds cash value during the first 20 years or so of the policy, which earns a very low rate of interest, and then uses that cash value in the later years to help pay the insurance costs for the insured in the later years. Yes, this cash can be accessed later in life if needed by the insured. With Term Insurance, the insured pays for the cost of insurance only for a predictable period of time which results in a much lower cost to the insured. This difference in cost is significant and can make a huge difference in cost when a large amount of insurance is needed. Our opinion at GMS is that Term Insurance is a more prudent purchase for our clients since the cost involved is for insurance only. We recommend that our clients consider investing in a structured program that will earn significantly more interest thus allowing their hard earned dollars to earn more during their lifetime. We believe that insurance provides a death benefit and an investment plan provides a living benefit. We can prove to our clients that over time their money would be better spent if their life insurance and their investment plan are kept separated.
The bottom line is; why would you invest in something that earns 2% when you can use that same investment and earn so much more.