by: Remie Longbrake | published: Oct. 5, 2020
Of course, no one likes to think about it, but at some point we’re all going to leave this Earth. Just as taxes are inevitable, so is death. While that may not be the best or most desirable thing to think about, the beauty is that you can and should prepare and with insurance solutions in place to help you can protect your assets and your family for when that time comes.
In general, there are two primary types of life insurance:
There are pros and cons of both types, so it’s critical to carefully compare the two to ensure yourself of making an informed decision.
While the cost of whole life insurance vs term is sure to come into play – and it’s something we’re going to discuss in great detail – let’s first start with a basic overview of each type.
The biggest difference between whole and term life insurance is that term life insurance does not include an investment component like whole life insurance policies do. The other main point of difference is that whole life insurance was designed to cover policyholders for their entire life, or up to age 100, whereas term life insurance only covers you for a certain period of time and then expires if not renewed, even if the insured person is still living.
With whole life insurance, you’re buying a policy with a guaranteed death benefit. As long as you continue to pay your premium, your beneficiary will receive the predetermined benefit at the time of your passing.
Some of the top features associated with a whole life insurance policy include:
With features like these, it’s easy to see why whole life insurance is a popular choice for many families.
Term life insurance is unique in the way that you purchase coverage for a predetermined period of time, such as 10, 15, or 20 years. Once this period comes to an end, you no longer have coverage. At that point, you’re once again in the market for a policy.
Top features of term life insurance include:
As you can see, term life insurance has a much different set of features when compared to whole life insurance.
In a perfect world, you’d qualify for a high level of life insurance coverage at an affordable monthly premium. While it may work out for you, life insurance companies take many factors into consideration when calculating your premium. This includes but is not necessarily limited to:
For instance, a 30-year-old in perfect health will pay less for the same life insurance than a 60-year-old with a history of cancer or other serious health risk.
This question is dependent on your financial situation but, when deciding between term and whole life insurance, you should consider the following questions:
As you compare the cost of whole life insurance vs term, do so with the idea that you can only afford what fits your budget.
It’s important to purchase a high quality and comprehensive policy, but make sure you’re comfortable with your ability to make the premium payment every month, quarter, or year and will not let coverage lapse.
Purchasing life insurance is a personal decision. Don’t allow sales materials to convince you that one item is better over another, but look at what the needs of you and your family are; whether it be long-term retirement attributes or life insurance. In the case of life insurance, there are other ways to provide the same benefits you’d receive from a permanent policy, whether that be from purchasing term coverage or simply self-insuring if that’s a feasible option.
Choosing life insurance can pose a significant challenge. While all life insurance provides funds in the event of the insured’s death, the same factors, the purpose for which the funds are intended, the cost, and the needs of the beneficiary should be considered when selecting the type of life insurance most appropriate to your situation.
We hope these steps will help you make an informed and confident decision. Please seek a qualified retirement or insurance professional before purchasing to fully understand the risks and benefits to your specific needs.