Suze Orman believes that term life insurance is a wiser investment than permanent or whole life insurance, according to Huntley Wealth Insurance Agency. The best strategy is to purchase a term policy and invest the difference between the term and permanent life insurance premiums.
Even though permanent life insurance policies build a cash value over time, that cash value is generally significantly less than what one earns through investing the difference in stocks, mutual funds or even a money market account. A whole-life policy averages a return of 2.6 percent as of 2015, and the highest paying type of life insurance policy is variable, averaging a rate of return of 7.4 percent. The average rate of return from mutual funds is about 12 percent, notes Huntley Wealth Insurance Agency.
Another issue with permanent life insurance is the high initial cost. The first 12 months of premiums that the policyholder pays go to the agent as a commission. It takes as long as 24 more months to cover all of the extra expenses of the permanent policy. While permanent life insurance is a remedy for people who have a difficult time saving money, having the discipline to sock money away pays dividends as Suze Orman sees it, reports Huntley Wealth Insurance Agency.