Life Insurance Blog

Suzie Orman-buy term only
March 26th, 2010
in Life Insurance

Suzie Orman is a dangerous person to listen to.   She is a jack of all trades and a master of none.   Her blanket statements about life insurance are ignorant and without grounds.    She constantly says that permanent insurance is a rip off and you should always buy term life.  Why is that Suzie?  Do you understand the tax advantage of life insurance with its buildup and death benefit?

While in many cases term is the appropriate direction for people to take, it is not always the best route.   If you can afford to buy some permanent life insurance I would certainly suggest you do.   That is the only type of insurance that is guaranteed to be in force when you pass away (provided you pay the premium).   The life insurance companies love when you buy term as they pay death claims on about 2 percent of the policies.  In other words, most people pay for life insurance for years and their family never gets any benefit.

On top of the permanent nature of this type of insurance, you can accumulate money on a tax free basis in the cash value.   If accessed the proper way, you can avoid ever paying income tax on any of the build up and can supplement you retirement tax-free.  Also, the cash value can be borrowed against during the life of the policy to buy things, invest, etc.   Suzie Orman is obsessed with 401k plans and loves the tax-deferral, but tax-deferral simply means you will pay compound tax later.   In addition the government controls the rules on these types of plans, while they don’t on life insurance.   A good example is you can’t access until 59 and a half.  What if the government adjusts the age to 62 and you are simply at their mercy.

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