single parenting with Amber Jones

 In watching financial guru Suze Orman (if you do not watch her I highly recommend it) the following is one of her top five things that she recommends NOT to do - but yours truly has done it and continues to do so. 

So, what am I talking about?  Quite simply I purchased a whole life insurance policy several years ago when I was young and dumb.  I would never make that mistake today.  However, the policy is for approximately $100,000 and because I was so young when I took it out the premiums are very low. 

For those of you who do not know, a whole life insurance policy is a policy which is good for your entire life.  It is never renewed, and as long as you continue to pay your premium, your beneficiaries will receive the face value of the policy upon your death.  Whole life insurance is typically much more expensive than a term life insurance policy because they know that at some point in time (your death) they will be paying the dollar value of the policy.  In addition, they also have an “investment” component that builds cash value for which you can borrow against.  Because of that investment component you also pay commission and fees for the policy which can really eat into any investment gains, therefore, most financial advisors will tell you there are much better investment opportunities for your money than a whole life insurance policy.      

A term life insurance policy will pay out only upon your death.  In addition, term policies are for a set number of years.  Therefore, you may pay premiums for 20 years but never need the policy (meaning you didn’t die) and have nothing to show for it after that time.  However, because the rates are so much cheaper (assuming you are in good health), this is generally the way that most financial advisors will instruct you to go. 

In addition to my whole life policy I also have a large thirty-year term life insurance policy.  So, why do I keep my whole life policy?  Simply speaking, once my thirty-year term policy expires, it will most likely be pretty expensive for me to get another term policy due to my age (assuming my health is still good).  My whole life policy rates will still be very low because they will not change from the rate they were when I took out the policy (24).  My whole life policy should be enough to pay for my funeral and I will hopefully have enough assets built up for my adult children that they won’t need additional funds from a term policy. 

Again, these are the choices that I have made for my family and their needs.  This may not be the best options for your family but I encourage you to review what you’ve done, why you’ve done it and obtain recommendations from professionals who can work through your unique situation.