Talk:Term life insurance

Anonymous edits

Hello, you've added some things that should probably be covered, but you've also created a POV mess. Please read the neutral point of view policy. Buy term and invest the difference is a POV. Also for NPOV, Wikipedia should not give advice, like telling the consumer they should do anything. I'm strongly considering removing all the changes made and trying to discuss them all to see what should go back, but lets see if we can fix what is there now. - Taxman ^Talk 14:26, July 20, 2005 (UTC)

This whole page is basically flawed.

"However, on most cash value policies like Whole Life insurance, the only way to receive the cash value is to cash out the policy. The beneficiaries receive the face value of the insurance but NEVER the cash value with Whole Life policies. Financial advisers generally advise buying term life insurance and investing the difference elsewhere to those who still qualify to contribute to other tax-deferred investment growth such as IRA's or 401k's."

This is also wrong, on whole life policies, cash value builds up inside the policy, which then gets added onto the death benefit. If you had a 100,000 face amount death benefit and the cash value built up to 50,000 then the death benefit would be 150,000. People need to research before they start posting. A lot of people look to wikipedia for credible information but reading this whole page I realize that it's far from "credible" —Preceding unsigned comment added by 24.187.105.133 (talk) 01:08, 18 September 2010 (UTC)

That's not true, either. Although some types of insurance do operate on the "face amount plus cash value" principle, whole life insurance doesn't. The insurance payout under a whole-life policy is equal to the face amount, regardless of what cash value might have been accumulated at the time of death. NewYorkActuary (talk) 15:46, 26 October 2015 (UTC)

Editor NewYorkActuary is correct. The general rule is that the cash surrender value is NOT added to the amount of the death benefit in a whole life insurance policy. This means that in most cases with whole life policies, if the face amount is $100,000 and the cash value is $50,000, the total payout upon death is going to be $100,000, not $150,000. Famspear (talk) 20:34, 26 October 2015 (UTC)

I agree: Policies may pay out Face or Face + Cash Value. The former is more standard for Whole Life. Kmaricq (talk) 03:55, 10 December 2015 (UTC)

Vagueness

"Insurance industry studies show that it is very unlikely that the death benefit will ever be paid on a term insurance policy. One study placed the percentage as low as 1% of policies paying a benefit."

This begs the question, "What study?" Could a source be provided please? -- Anonymous Wiki user

Guaranty of Future Insurability

One reason for a young person without a spouse or children to buy yearly renewable term is to guarantee future insurability so that the coverage is available at a reasonable price to protect dependents yet to be conceived. As people age, even young ones medical events happen e.g. high blood pressure, diabetes, HIV, physical trauma from accidents, etc. A recent quote from an american company with a Best's Superior rating offered 250,000 USD of coverage for an annual premium of 240 US dollars. This is a modest price to pay to guarantee that ones children will have a parent that is properly insured.I have used this system and found it worked very well. I am now 60 and as premiums grow ever higher I drop coverage, since I have limited need now for insurance as my children are grown up. I have recommended this strategy to them and in fact have taken out a modest amount of YRT on them with the view that I would give them the policies when they marry.Grove1 19:01, 9 September 2006 (UTC)

Neutrality Disputed flag

Having just read through the article, I don't sense a POV. Do any others feel it is time the flag be removed? 2*6 03:22, 12 January 2007 (UTC)

No, I don't feel it should be removed yet. I don't understand why it dicusses permant insurance and the pay out likelyhood. I would like to see that section changed to include the fact that they use the same Mortality Tables.

I also sense no POV, particularly after I've gone through the whole thing with a fine toothed comb. For that matter, I don't think the "cleanup" tag may be necessary anymore, although it still needs sources. Balancer 04:34, 8 February 2007 (UTC)

Addendum: If there are no objections, I'll remove them both after two weeks. This article has gone a very long way from the way it was in May. Balancer 04:39, 8 February 2007 (UTC)

I'm removing the tag, I see no POV problem here in the current article, and the last claim there was one was a month ago. Problem solved. --Xyzzyplugh 16:29, 13 February 2007 (UTC)

Buy term invest the difference is a POV that AL Williams came up with. I'd like to warn you that this article, being in Financial Services with MetLife, is very very flawed.—Preceding unsigned comment added by 24.187.105.133 (talk • contribs)

The whole use of the term "permanent" insurance presents an inaccurate POV issue. This is used by the life insurance industry to disparage term insurance. It would be more accurate as well as neutral to use the term "cash value" insurance.

The point saying all permanent insurance will pay out eventually wrongly assumes that policy holders will hold their policy until death. A significant # of them lapse in one way or another before the death of the insured, thus they do NOT pay out. [I don't have the statistics but have seen some & they should be available from industry sources. The figure 40% sticks in my mind but not sure if that is right.]

In addition, many of the variable life products have language to the effect that even when the scheduled premiums are paid, the policy may still lapse if the cash value is not sufficient to keep it in force. That sounds even less permanent than term insurance which is at least guaranteed for the initial term & today can be guaranteed renewable to age 95! — Preceding unsigned comment added by 68.4.221.58 (talk) 02:32, 20 February 2012 (UTC)

The same is true for term insurance - if you don't make your payments, your policy lapses.

'Permanent insurance' is no more misleading than 'term insurance' in this respect, and 'cash value' does not convey the same meaning.

Renewing 'up to 95' means choosing the policy most geared towards a long renewal period, and 'many' term life policies would provide far less renewal options. I don't work in the industry yet, but I expect policies lapse, not always, but often, because the insured no longer wants it.

If McDonalds sold a burger called an Awesome Burger, and it had a Wikipedia page for some reason, Wikipedia would still call it an Awesome Burger with no dubious tag, even if it wasn't awesome. Can we please all just get on with our lives?Gred Sixteen (talk) 11:57, 2 May 2014 (UTC)

Hmm, cash value has its own Wikipedia page. So does Permanent life insurance. Gred Sixteen (talk) 12:49, 2 May 2014 (UTC)

Why not call it "Whole Life" to be consistent with the page on the topic? Kmaricq (talk) 04:07, 10 December 2015 (UTC)

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I just read a CNN article refuting the argument that whole life insurance is better than term. I think this article needs both pts of view and not just of the whole life insurance is better than term. I think both have its advantages and disadvantages. It is interesting that whole life gives 80% commissions to the broker/agent where term only gives 10%. I believe that this is worth noting when folks are looking at life insurance types and their financial planner or agent is pushing one over the other. ---- anonymous Wikipedia user —Preceding unsigned comment added by 69.138.245.144 (talk) 17:23, 15 June 2008 (UTC)

You don't know what you're talking about, the commissions on term vs perm are barely relevant. If anyone knew anything about life insurance that's been posting or editing, or anything about the financial services industry this article would look totally different.—Preceding unsigned comment added by 24.187.105.133 (talk • contribs)

From an actuarial point of view, no type of life insurance is better or worse than any other type. They are just different ways of structuring probabilistic payouts and they all have a right price. The "best" life insurance is the one that matches an individuals needs. Kmaricq (talk) 03:52, 10 December 2015 (UTC)

Study

"Insurance industry studies show that it is very unlikely that the death benefit will ever be paid on a term insurance policy. One study placed the percentage as low as 1% of policies paying a benefit."

I am also interested in finding such a study. If such an one exists, however, it is likely that other types of 'Term' insurance were included, such as Credit insurance (the last page of many loans, where you pay a few dollars each payment so that your benificiaries don't have to pay the loan if you die. They are only on small loans of very short periods, and there are so many of them that it would skew the numbers dramatically.) Without including all of those types of Term Insurance in the article (which would clutter it unnecessarily), and especially without a source, that statement should be removed. Ecawilson 13:10, 25 October 2007 (UTC)

Dubious tag

I removed a dubious tag, because there was no talk about the tag here. Gred Sixteen (talk) 12:59, 2 May 2014 (UTC)

Payout likelihood and cost difference

The 2nd and 3rd paragraph of this section are flawed. Cash value is not a form of self-insurance. It is the result of increasing mortality and level premiums. In order to keep premium level when mortality increases, the insured must overpay in early years and (relatively) underpay in later years. The cash value is the accumulation of this overpayment. By the time that the insured is 100% likely to die, the cash value should equal the face amount and will be paid out. Because of this, I doubt that the third paragraph can be true. As long as there is increasing mortality and level premiums, there will be cash values, and while term insurance has cash values small enough to be legally ignored (and therefore not exist from the consumer's perspective), a correctly priced whole life policy will always have cash value build up to face amount by the end. If others agree, I'm happy to edit the section Kmaricq (talk) 04:02, 10 December 2015 (UTC)

I agree that this section is flawed. But so is the entire article. One big problem is its discussion of financial planning. For what it's worth, I don't think Wikipedia should be in the business of giving financial advice. And even if it was, it should be in an article devoted specifically to the use of life insurance in financial planning. The instant article is not the place for it. Another problem is its lack of a worldwide perspective (which is not separate from the first problem, because different jurisdictions call for different tax treatments and, hence, different approaches to the use of insurance).

When I first stumbled across this article a few weeks ago, I resolved to do a major overhaul to remove the financial-planning and tax discussions. What I have in mind is an article that gives separate discussion to group and individual term insurance, giving for each a basic description, a history of that form of insurance, and a discussion of common product features. If you'd like to work together on this, I'll be happy to hear your thoughts.

Regarding your specific observations, you are quite right that the actuarial discussions is dead wrong. Whether the section would be improved with a technical discussion of reserves and cash values is debatable. I'm of the opinion that actuarial niceties are not appropriate in a general discussion of term insurance and that the article would be improved by simply deleting the section in its entirety. But perhaps you disagree. If you do go ahead with your proposed re-write, I note that level premiums do not necessarily imply the existence of cash values, even for whole life insurance. Level premiums create the need for a reserve liability to be held on the books of the issuer. Whether or not any cash is available to the policyholder is a question of policy design (which, in turn, is heavily influenced by the laws of the particular jurisdiction in which the policy is issued). It is quite possible to have a level-premium whole life policy that has no cash surrender values. You don't see that in the U.S., because the Standard Nonforfeiture Law prohibits it. But this is not true everywhere in the world.

I hope this was helpful. NewYorkActuary (talk) 20:04, 10 December 2015 (UTC)