Term Life Insurance vs. Whole Life Insurance
Why is term life insurance better than whole life insurance? Simply put, because it’s cheaper.
If you look online, you’re going to see a Dave Ramsey , a pretty well-known person in the life insurance industry. He’s a big fan of term life insurance, constantly promoting in the media as to why it’s better.
Let’s quickly address this from the the insurance agency perspective. We at Protect With Insurance have a lot of experience with these type policies.
Dave Ramsey say that terms life insurance is better because it’s less expensive per thousands dollars of coverage.
If you think about it, that’s very common sense. If an insurance company knows they’re only on the hook for 10 years or 20 years or 30 years for a $100,000 policy, that’s going to cost you a lot less than a whole life insurance policy where they have to pay out any time that it occurs, even if it’s in 60 years out or whenever it may be.
Term life insurance policies are less expensive and more affordable than whole life insurance policies. Term life insurance offers protection for a pre-determined time and are more flexible. They are also good for young families because the are much cheaper for those who are young than for those that are older.
Younger persons may acquire substantial face amounts of coverage at relatively low immediate cost, perhaps more than their immediate needs, and thereby guarantee that they will have the necessary level of coverage when their needs and family obligations increase in the future, even if this means they become un-insurable.
Term insurance allows a person to acquire the greatest death benefit for the lowest premium outlay when the policy is first issued. However, this does not mean that term insurance is necessarily the least expensive form of insurance over the full duration of needed coverage. Because term premiums increase at each renewal, at the later ages the premium cost will far exceed the level premium that would have been charged for an ordinary whole life policy issued at the same age as the original term policy.
Life insurance proceeds are not part of the probate estate, unless the estate is named as the beneficiary of the policy. Therefore, the proceeds can be paid to the beneficiary without any delay caused by administration of the estate.
There is no public record of the death benefit amount or to whom the death benefit is payable (if paid to someone other than the deceased’s estate). This helps to preserve confidentiality for the beneficiary of the policy.
Term Life Insurance Downside
So term life insurance is always going to cost you less. The downside is that it really needs to be considered carefully before choosing a term life insurance policy. When you get to the end of that term, meaning you outlived the expiation date of you term policy, it’s going to completely expire and it will be over. That’s it! If you want to stay covered then you’ve got to get re-insured with a new policy based on your age at that time.
Some insurance companies offer programs that will give you the option of paying significantly more to keep that term policy and continue to use it for another five, 10, even 20 years. But you need to understand that if you’re going to keep a term past the term expiration, that price raise is going to be significant.
And it is commonly going to be about eight to 15 times what you were paying before. This is no exaggeration. You need to be mentally and emotionally prepared for that.
Now that being said, there are a few situations where term life insurance is a better fit for someone. If you are an excellent health, generally that means three or less prescription medicines, no moderate or severe medical conditions, you can get good coverage for a reasonable price. You can even get good coverage at a fair price on minor conditions you might you have as long as you are young enough.
Term Life Insurance and Seniors
Lots of seniors do not qualify for term life insurance.
If you are on a tight budget and you’re past the age of 60 a term life insurance policy of $100, 200, 000 or $500,000 life insurance term policy is going to be very expensive.
We have seniors that reach out to us. They might be in their seventies or even in their eighties, and they want a 300 to $500,000 term life insurance policy. It’s going to cost a fortune.
Of course it never hurts to get a quote. Reach out to us. We’re happy to take care of you. We’re happy to provide a life insurance quote term life insurance.
Is so costly as you get older. You need to be aware of that. Be assured that we at Protect With Insurance we have some of the best priced options in the country. We have helped a lot of people find term life insurance coverage within budget.
Sometimes what that might mean is instead of getting a $300,000 term life insurance policy, maybe one should get a hundred thousand dollar policy or even a $50,000 term life insurance policy. We may not be able to get the higher coverage at the price you asked for, but know that we can adjust things here and there to get your the best term life insurance coverage possible for the best price available.
If you don’t qualify for term life insurance or you cannot afford it. because it’s not within budget whole life insurance is a great option.
For some people there’s a range of age, health considerations and pricing that meets up very, very nicely.
Some people because of severe health issues and because of age, maybe even because of build height and weight, term life insurance is not a good fit.
We at Protect With Insurance can make recommendations to save you money. So reach out to us to see what we can do. Term life insurance has a lot of advantages. Not everyone can get it. Not everyone can afford it, but if you can qualify for term life insurance it can be a great thing.
Whole Life Insurance Advantages
When you hit the age of about 45 to 55
presents substantial advantages because that’s when it is least expensive to get it as an adult.
Whole life insurance provides lifetime coverage, can provide a source of funds for education and other opportunities and access to cash value.
One of the most appealing benefits of purchasing a whole life insurance policy is this: As long as you pay your premiums, your death benefit will never expire. It is guaranteed to be paid regardless of when you die, whether that’s tomorrow, in five years, 80 years or even further away.
That’s a key difference between whole life insurance and a term life insurance policy, which will only pay the death benefit if you pass away during the window of time (or term) that your policy covers.
Additional Whole Life Insurance Benefits
Also, the premiums that you pay for your whole life insurance policy are guaranteed to remain fixed and consistent for as long as you have your policy. Other types of insurance policies may require you (or allow you) to adjust your premiums over time.
Further, cash value is one of the key living benefits of whole life insurance. A portion of every premium payment you make is added to your policy’s cash value. That becomes money that you can access at any time for any reason. Since it’s guaranteed never to go down, it can become an important, stable part of your financial plan.
In addition, whole life insurance has several key tax advantages. The death benefit is typically tax-free. In addition, the cash value growth (in addition to growth through dividends) is tax-deferred — you would only owe tax on the growth if you surrender your policy and take out the money. You can always take the amount you paid into your policy tax-free. In addition, you can borrow against your money — perhaps to ride out a market downturn in retirement — without paying taxes.
Summing it up, in addition to guaranteed cash value growth, many life insurance companies pay dividends. While you can take dividends as cash or use them to pay a portion or all of your premium, many people reinvest them in their policies. That can allow your cash value to accumulate even more quickly.
Whole Life Insurance For Children
Now, that being said, if one has the foresight to get whole life insurance do this for their children under the age of 18, the cost of the whole life insurance policy is a fraction of what it would cost to get the same type of life insurance if they were adults.
It’s super-cheap whole life insurance ad a terrific way to ensure the financial future of you offspring. We suggest that before they reach the age of 18, that their direct family strongly consider getting them whole life insurance. Children’s whole life insurance is so inexpensive and they’re set for life with their life insurance policy. So consider this because it’s a wonderful way to go.
And it’s a gift that keeps on giving. Your family will continue to think about you and be grateful towards you for getting whole life insurance when they were children.