Is whole life insurance worth it?

The following post is written by Brian So from Brian So Insurance

If you have ever spoken to a life insurance broker or researched life insurance online, you may have come across a type of insurance called whole life insurance. What is whole life insurance and how does it compare to term insurance? More importantly, is whole life insurance worth it?

What is whole life insurance?

Whole life insurance is a type of permanent life insurance. Its premium is guaranteed and level for the life of the insured until age 100, when the policy is paid up and no further premium is necessary.

Because the premium never increases over the life of the policy, it starts out much higher than the premium for term insurance. The premium in the earlier years is more than necessary to cover the cost of insurance. The excess is kept inside the policy as a cash reserve. As the insured ages and his mortality rate increases, the premium he pays is no longer sufficient to keep up with the mortality rate. The excess premium paid in the early stages helps supplement the policy in the latter stages.

Continue reading

Understanding Health Savings Accounts

The following is a 3rd party contirbution
Even with insurance, the cost of healthcare in America can still feel like sustaining another injury, only this time it’s to your wallet. A new type of personal savings account, called a health savings account (HSA) can make it more affordable for certain individuals to pay for medical costs without ruining their budget or bank account. Learn how HSAs work as well as their advantages and disadvantages.


An HSA works much like any other personal savings account, but they’re only available to individuals who have a high-deductible health insurance plan. Even though these insured individuals have high deductibles, their monthly premiums are often low. If you like the idea of getting your up-front healthcare costs as low as possible, a high-deductible plan might be perfect for you. Generally, HSAs are a better fit for those who are near retirement and those in a financial position where they can save for future health care expenses.

Continue reading

The Pros and Cons of Buying Term and Investing the Difference


The following post is written by Brian So from Brian So Insurance

When it comes to life insurance, many of you may have heard of the strategy ‘buy term and invest the difference.’ Before I get into the concept behind the strategy, you should know the basic differences between term and whole life insurance. With term, you purchase temporary insurance that expires at a age 80 or 85, with premium increases at every term renewal, most common being 10 and 20 years. Whole life, on the other hand, has a fixed premium but never expires as long as the insured continues to pay the premium. The premium for term insurance starts out much more manageable, but its price increases exponentially and eventually outpaces whole life.

Whole life insurance also has a cash value that is guaranteed and increases every year. Contrary to popular belief, there is no investment involved with whole life insurance. The cash value is actually a reserve of premium kept on the side by the insurance company due to overpayment of premium in the early years.

Buying term and investing the difference means that you purchase term insurance and invest the difference in premiums between term and whole life. The hope is that when you cancel the policy at age 65, your portfolio will be larger than the cash value in a whole life policy.

For example, let’s consider a 35 year old non-smoking male looking for $500,000 of coverage. His options are a term-30 policy, which would take him to age 65 at renewal, and a whole life policy. The annual premium for the term-30 policy is $750, while the annual premium for the whole life policy is $3,395, for a savings of $2,645. Assuming he invests this amount at the beginning of each year for 30 years with a 6% return, he will have $221,655 when he turns 65. The cash value of the whole life policy at age 65 will equal $131,500.

Clearly, buying term and investing the difference is better than buying whole life and cashing out at a later date. Or is it? Are there other factors that affect the comparison? Let’s take a look at the pros and cons of the strategy.

Continue reading

Three Things to Think About Before Buying Life Insurance

The following post is written by Brian So from Brian So Insurance
Buying life insurance, like buying a home, is a long term investment. You wouldn’t go house hunting without doing some background research on important points, such as location, cost and mortgage rates. So why would you buy life insurance without also doing proper due diligence? Here are three things to think about before buying life insurance.

1. Why you’re buying life insurance

The reason you’re buying life insurance should be very clear to you before you go out and shop. You can think of this as your life insurance goal, similar to how you have a financial goal. Most readers’ goals will likely be to provide support for their family in case something should happen to them. Baby boomers near retirement may want it to preserve their estate for their children and grandchildren or as a gift for their favourite charity. Once you have a goal, you can develop a plan to reach it.

2. How much life insurance coverage you need

The amount of coverage you require typically boils down to two factors: cash and income needs at death. The cash need includes paying off the mortgage balance and other debts, setting up an education fund for your children and emergency fund for the family, and final expenses. The other part of the equation, the income need, is used to provide an ongoing stream of income for your family. You can do a rough estimate on how much coverage will be needed to ensure income for a certain number of years, or you can use the many life insurance calculators online that will produce a more accurate result. Please see my post herefor more detailed information on how much insurance coverage you need.

3. Have a budget in mind

You may already know about the 2 major types of life insurance: term and permanent. Term is purely for protection purposes with premiums that increase whenever the term expires. Depending on the specific product chosen, permanent life insurance may feature cash values, investments, dividends, increasing coverage and limited pay options. Term is seen as more budget friendly than permanent, especially during the early parts of the contract. But don’t just look at the initial term price though, because the premium jump after the term expires can be drastic and will likely outpace the increase in your income. This is why I mentioned life insurance is a long term investment. You don’t want to buy a term-10 product because of its low cost, only to cancel it in year 11 when you still need it because the premium is now 3 times as much. Budget for both the present and the future.
I’ve presented three points to consider before you buy life insurance. What else do you think is important?
Brian So, CFP, CHS, is an insurance broker and blogger at Follow him on Twitter for his musings on life insurance and why the Vancouver Canucks will win the Stanley Cup next season (Seriously).