When it comes down to choosing between term life insurance and whole life insurance, which one is better? There is no right answer, it all depends on the amount of time coverage needed, affordability, and whether or not you are looking for a cash accumulation or just pure death benefit protection. Let’s start with term life insurance. Have you considered buying burial insurance for your parents? There are companies who offer this coverage and we can help you find a specialist who can help you based on your individual needs.
Term Life Insurance
Term life insurance is designed to offer protection for a set number of years, or when permanent coverage is just unaffordable. Term life insurance has a set number of years ranging from one to thirty and the cost of insurance remains level. Once the policy expires the customer must then get another exam and then get quoted again and rates will most likely go up. If the insured dies while the policy is in force, then the assigned beneficiary receives the death benefit of the policy tax-free. Term policies can be converted into permanent no medical exam policies, but the rates will increase. If you have already shopped around and have thought about going with someone like State Farm Life Insurance, let us help you understand how these plans work before making a final decision. If you have health conditions such as diabetes and still want affordable life insurance for diabetics we want to help!
If you would like more information on some of our reviews such as with New York Life, we have information for you. Reading these can help you better understand each company and what they offer.
Advantages
- Provides tax-free benefit at the demise of the insured.
- More affordable than Whole Life Insurance Quotes.
- Flexible lengths of coverage.
- Conversion rights to protect your insurability.
Disadvantages
- Pure death benefit.
- No cash value.
- The policy only protects for a period of time and can cause a false sense of security.
Whole Life Insurance
- Traditional- Traditional whole life insurance guarantees three things to the consumer: death benefit, cash value growth, and a fixed premium. Whole life insurance is the most expensive form of permanent life insurance and is also the oldest form of permanent coverage. This type of policy is similar to a term policy in that the policy has a cost of death or cost of insurance, but the consumer pays more for the policy than the cost of insurance to build a tax-free savings account earning dividends bases on the financial health of the insurance company. A Traditional policy is set to mature over a specific period of time, where a death benefit is then paid and the policy terminates. Although many people today use whole life insurance for investment purposes and borrowing money or withdrawing tax-free money earned inside the policies and for this purpose the newer types of policies like Universal Life Insurance are more to my liking.
- Universal Life Insurance- A Universal Life Insurance Policy is a good choice for someone seeking flexibility for their insurance solution. The policyholder pays a premium into their account, where it then grows each year at a specified interest rate. Expenses are then paid from this account each month such as the cost of insurance. Universal Life Insurance accumulates growth tax-free and loans can be taken out from this account just like whole life insurance, as well as withdrawals for personal needs. However, because the policies are flexible the more money taken out and the longer the loans go unpaid, the less death benefit and cash value the policy has. There are more risk and reward and as long as there is enough cash value in the policy to cover the cost of insurance each month, then the policy will continue.
- Variable– GIA doesn’t solicit consumers to buy variable products that require risk but for the purpose of comparison, I will provide a definition. A variable life insurance policy is best suited for the consumer who has a high tolerance for risk. A variable policy lets you invest any percentage of your premium into the insurance company’s investment fund. You are able to choose from stocks, bonds, mutual funds, etc. depending on the amount of risk you want to take. Most companies have investment brokers who monitor the account for you. This is very risky because your death benefit and cash value vary based on the portfolio’s performance. You have the option to pay an extra premium for a guaranteed death benefit. Just like all other life insurance policies, the cash value grows tax-free. Therefore, if you trust your investing skills and are a risk seeker, then a variable life insurance policy might be for you.
Advantages
- Guaranteed Level Premiums.
- Cash Value along with Death Benefit.
- Cash value is tax-free money, unlike 401K.
- (Excluding variable) Very conservative safe cash accumulation.
- Great solution for life insurance over 50 for final expenses.
Disadvantages
- Expensive life insurance rates.
- Long term commitment, usually lifelong.
- Sold for the wrong reasons by captive agents.
- Usually, because of high cost, most don’t buy enough and are underinsured.
The question, “Which type of life insurance is better,” remains rhetorical, but at least you understand what you are getting from each type of policy now. Three factors differentiate the two types of insurance: the amount of time coverage needed, affordability, and if you want just a death benefit. Now that you have decided which insurance solution fits you best, it is time to take the next step and contact an independent life insurance broker so they can find you the most affordable life insurance!