This Is the Biggest Money Disagreement I Have With My Husband
- Term life insurance is often a better buy than whole life because you can purchase coverage for a specific period of time.
- Some people like the investing aspect of whole life insurance, but other investments often have a higher return.
It has to do with insurance and investing.
When it comes to managing our money, my husband and I don't fight very much. We both agree we want to steer clear of most types of debt and that we won't carry a credit card balance. And we each have some separate spending money so we can buy things we want without having to worry about asking the other person.
There is one money issue we disagree on, though. It has to do with the life insurance policies we purchase.
Here's why we disagree on whole life insurance
When it comes to life insurance, my husband and I agree we each need to have a policy. After all, we have two kids and lots of financial commitments, and we rely on both of us working to maintain our lifestyle.
But I firmly believe that a term life insurance policy is a better option -- and my husband insists that whole life insurance is the right way to go. Term life policies provide insurance for a limited period of time and pay a death benefit if the policyholder dies while covered. Whole life policies provide insurance as long as premiums are paid, and there's also an investment component.
My husband likes the fact that he's investing when he pays insurance premiums. He believes this is a great way to invest because we can borrow against the value of the life insurance policy to generate tax-free income in retirement.
However, I know borrowing against life insurance is much more complicated than it seems, and that whole life policies come with lots of fees and don't provide as generous a return as other investments. So, I generally believe they are a waste of money and that we should opt for term life coverage instead.
Who is right about whole life vs. term life coverage?
I believe I am correct in my position that whole life insurance is not worth the money. And I'm not the only one who takes this position. Many financial experts, including Dave Ramsey, think a whole life policy is a rip-off.
After all, there is no need to have coverage for life when people will stop depending on your income at some point. And there is typically no reason to tie yourself into an investment that can be hard to access and that tends to provide a lower average rate of return than other investments you could buy.
But some people think whole life is the way to go -- and that's not necessarily wrong in all situations. For those who have a need for lifetime income (perhaps because of a disabled child who will need expensive care after they pass), then whole life coverage makes sense. And for those who don't or can't invest in other things but who will pay insurance premiums consistently, investing in whole life insurance could be better than not investing at all.
Neither of these situations apply to my family, though, so I will continue to believe I am correct that my husband's whole life policy is a waste of money -- and he'll continue to disagree and to pay the premiums for it. Since we have plenty of other investments, it's not the end of the world, so I can live with that.
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