Hello there, it’s Chad McMahan with protect with insurance, here in beautiful Prescott Valley, Arizona talking about life insurance, and I just got a van out of an appointment with my friends and clients, Tim and Dana, and one of their questions during the appointment was what is better for me? What is better for us? whole life or term? And what should we do that’s going to give us the best benefit?
And so here are some of the quick differences and then all elaborate just a little bit quick differences in whole life, there are a lot of advantages and there are a couple of disadvantages of whole life, the advantages of whole life is never going to expire in some ways, it’s the best kind of life insurance that there is. It’s never going to expire, it’s never going to change, in at least, it never should change in price and coverage.
Assuming it’s a level policy, meaning it’s never going to increase or decrease and they’re fantastic, you know that they also accrue a cash value which should only ever be seen as an emergency fund. If you pull out money out of the cash value in your whole life policy, that’s less money that will be for the death benefit so if it’s $20,000 whole life policy and you pull out $5,000 now, and the death benefit is going to be roughly fifteen thousand dollars. You can always pay that money back in and then it’s a twenty thousand dollar policy again but that cash value is very handy if you have an emergency that comes up, it’s a wonderful thing.
Now the main disadvantage of a whole life policy is that they are generally smaller policies between five and about $40,000 in coverage. There are exceptions to that; there are larger whole life policies I have access to many options, but they’re more expensive, you know you’re looking at a policy that’s never going to expire, then the insurance company is taking on a grand majority of the risk, they’re saying that in this policy, we’re going to guarantee until death without any exception at all. It’s a full coverage policy, so if the insurance company is going to do a larger policy, let’s say a hundred thousand or three hundred thousand dollars, it’s going to cost a lot more and that’s just common sense.
The other type of policy is a term Policy; now term policies are usually larger coverage policies which make them very handy for things like mortgage protection, you know a life insurance policy that’ll pay off the mortgage in the event of a death, it’s a great way to secure your family. A lot of my clients are even younger couples with kids; a term policy is going to be ideal, maybe, a larger policy like three, four, five hundred thousand dollar policy, even if it’s a two hundred thousand dollar policy, or something larger, if something happens, it can either pay off that mortgage or be just money that’s going to be much needed in the event of a death, you get one person’s income that disappears.
I know this is awful stuff to hear, but this is real stuff and it’s important to talk about and at least consider it, so if you get that income that disappears not only is that going to make life a lot harder financially and otherwise, but when you lose a loved one, it makes decision-making almost impossible, so something like not being able to afford your bills is unbearable and so having that bigger check come in as obviously, it’s a big deal; it’s not just money but a much bigger deal than that, and that’s why this is such an important thing, the downsides of term policies is that they do expire and there’s no cash value.
Most terms, not all, when they expire, you have to get reinsured and at that point term probably won’t be an option typically term policies are going to be, well, really 10, 15, 20, 25, or 30-year policies, depending upon your age and depending upon what’s affordable. The longer the term, the more expensive it’s going to be in terms of a monthly cost or an annual cost. Your quarterly cost, those are the key highlights on that now. Often, but not always, there are exceptions to this, you need to talk about this with your agent a lot of times.
These term policies are going to have some amazing living benefits built-in as well. They’re designed for people that are younger and are looking to insure themselves not permanently, but for a long period, so 20, 30 years is most common and a lot of these term policies not all but a lot of them are going to have these living benefits built-in, so if they have an issue with a disability, if they have a health problem, that’s significant something, like that, these policies can pay somewhat or pay entirely while they’re alive and that is hugely helpful, you know, get that mortgage paid off while they’re still around and still alive and that’s a big deal.
So make sure that you ask about that when you’re sitting down with someone to get more information, that is the quick of it and if you have more questions please, folks reach out to me, I’ll be happy to help you, and you can also call me directly but anytime that you comments on videos, we’ll take a look at that, we’ll get to it and if you ask for videos on things; we’ll be happy to provide them. Alright, everyone, this is again Chad McMahon with Protect with insurance signing off. Take care.
If you are located in the Cottonwood, Sedona, Flagstaff or Prescott area and are looking for more information on affordable Life Insurance please don’t hesitate to contact us. Use the links below or call us directly at: (928) 323-0933.