While life insurance is extremely beneficial, it’s also difficult to understand which may be why so few individuals own a policy. Do you actually need a term or whole life policy?
Life insurance is so much more than a policy. It ensures the financial protection and support of your dependents and loved ones in the event of your death. A life insurance policy will help your family cover funeral costs, mortgage payments, college tuition, and many other expenses. While life insurance is extremely beneficial, it’s also difficult to understand which may be why so few individuals own a policy. According to the non-profit industry group Life Happens, 63% of Americans agree that life insurance is necessary, yet a staggering 43% have none at all. Educate yourself so that you can protect your family and loved one.
Term life insurance is the easiest to understand and is the least expensive of the two types of life insurances. Term life policies cover an individual for a specific period of time in order to protect your family in the event that you pass away prematurely. These terms can last anywhere from one to thirty years. The premium price will most likely remain at the same amount for the length of the policy.
If you aren’t sure when to purchase a term life insurance policy, the general rule is to start one when your family is the most financially vulnerable. For example, you're considered vulnerable if you have young children or other family members dependent on your income. Choose a policy amount that will continue to cover your dependents once your income is no longer a resource for them. The payout will help your family pay for bills and services you used to provide, like childcare.
And as for the correct length of the policy? Generally your term insurance should end around the same time your family’s dependency does. Like if your children have moved out, your home mortgage is completely paid off, and you have a pretty solid savings account to fall back on.
Term life insurance would be the appropriate choice over whole life if:
Under the umbrella term “permanent insurance,” includes policies known as variable, universal, variable universal, and whole. Whole life insurance is the most well-known and easiest to understand. It’s a lifelong policy and therefore is more expensive than term, but does offer more benefits. A whole life insurance benefits will be reduced if loan and interest bills go unpaid. However, even if the death benefit is reduced, it’s still guaranteed along with the growth of the cash value.
This cash value comes with a guaranteed rate of investment return. The value grows over time and no tax payments are required for the gains. With a cash value, whole life policies can be borrowed against or cancelled for the cash in hand. Just remember that once you cancel, you will no longer have coverage. Whole life policy premiums remain the same throughout the length of the policy.
Whole life insurance would be the appropriate choice over term if:
Now that you understand the basic differences between term and whole life insurance, you might still be wondering which would be the most beneficial for you based on your role and situation within a family.Our table highlights specific examples and makes suggestions for the type of life insurance you should consider.
Whatever reasons you have for wanting to open a life insurance policy, it’s best to shop around to ensure you’re getting the most beneficial and affordable policy based on your needs. Use a quote comparison site like Insurify that allows you to build, customize, compare, and purchase a policy online or over the phone in minutes. You’ll feel better knowing your family is protected with the right policy.