Do you need to choose between term and whole life insurance? Understanding the difference between whole life and term is an important first step when buying life insurance. The wrong policy could be disastrous. Learn how to avoid this.
This post will discuss the main reasons why Whole Life Insurance is a better option than Term Life.
Whole Life Insurance – Is it Better than Term Life Insurance?
Whole life may be the best option to meet your insurance goals for several reasons.
Consider your age when deciding whether term life insurance is right for you. Term Life Insurance is only valid for a limited time. You will need to purchase a new life insurance policy if you are still young. This could be more expensive. The cash value of the policy is another reason whole life insurance may be better. This post provides examples of why Whole Life Insurance may be a better choice than Level Term Life Insurance.
Is term life better than whole life insurance?
It is often more affordable to purchase a term life insurance policy, especially if you are younger and shopping for your first policy. If you’re looking to protect loved ones and your family in the event of an early death, Term Life Insurance is the best option. You can also get a cheaper policy if you’re looking to pay off your mortgage and protect your children. It is easy to get a term life insurance. The cost of a 15-year or 20 year term life policy will be very affordable, and you’ll get the protection that you need.
The older you get, the more life insurance requirements change
As you age, your insurance needs will generally decrease. Your children may grow up and leave on their own. You have paid off your mortgage. Your income needs will decrease significantly when you retire. At some point you’ll want a less demanding policy.
Financial advisors say that a 30-year term policy will be more affordable, and provide you with the protection you need. After the 30 year term life policy ends, you and your spouse may have enough money to retire on. Your children will also be grown.
Buy Term and Invest the Rest
Why pay more for life insurance that will eventually expire when you can invest the extra money in your future? Theoretically, your family and you would be better off investing the savings between a whole life policy and a term-life policy. You will get a better return on your investment than if you put that money in a whole-life policy. This philosophy is applicable in many different situations.
Examples:
- Why spend money on a restaurant meal when you could eat at home?
- You can also pay to view movies on your cable provider or Netflix.
- Instead of paying for gas, take the bus or bike.
Most people lack the discipline to invest the extra money over 30 years. You will probably spend your money elsewhere.
You are a disciplined person – Congratulations!
This philosophy could be applied to choosing Term Life Insurance versus Whole Life Insurance. Before you jump on the Term Life Insurance bandwagon, consider the benefits of Whole Life Insurance.
Is Whole Life Insurance a Better Investment?
It’s a fact that 90% of the insurance policies sold on Life Insurance Blog are Term Life policies. They are the best choice for most people. There are still 10% of people who do not believe that Term Life Insurance is the right choice. Many established insurance companies, as well as TV personalities, advise consumers to choose term life over whole life. However, some people disagree.
You will learn reasons why whole-life might be the best option for you.
Consumer tip: Insurance agents earn more commissions for a whole-life policy with cash value than a term policy. When deciding which policy is best for you, ask yourself some questions.
- Do I need a whole-life policy and is it right for me now?
- What is the probability that I’ll need life insurance up to 100 years of age?
You could save a lot of money by investing in whole life. You can Google the concept of infinite banking to get some ideas.
Consider these reasons when deciding whether a policy with cash value is the best choice for you. Consider these factors:
Would you like coverage that lasts your entire life?
It is not that much of a difference between term and whole life. You will pay more for the whole life insurance, but not by much.
You can treat your whole life policy like your personal bank. Whole life is a great option because it covers your life. It also has some outstanding features, which make it an attractive product. A portion of the life insurance premiums you pay goes into a cash-value account, which grows tax-deferred over time.
The Cash Value increases slowly initially, but then accelerates later. You should discuss with your agent the different policies and how they grow. This is the main reason why term insurance rates are lower than whole life.
Most people use the cash value of their policy to pay their premiums. However, if you decide to do this, you will still have to pay your premiums to maintain your insurance.
You will be required to repay the loan with interest if you require it for any reason. However, this rate is typically lower than that of a bank loan. If you decide not to repay the loan, you will have to pay the interest as well as the amount owed when you die. You should consider this option because the amount that you withdraw could result in your beneficiaries receiving less money.
15 Reasons why whole life insurance is better than term life insurance
We’ll look at the top 15 reasons a whole-life insurance policy may be a more attractive option than a term life.
1. You are over 50 or close to it
The premiums for a term policy can be very high as you get closer to retirement. You have a high chance of outliving a policy if you choose a term life insurance policy that lasts 20 or 30 years. You’ll have to pay high premiums if you want coverage beyond the policy term. You’ll need to purchase lifetime coverage before you turn 50.
2. The Liquidity of an Estate
No matter how rich you are, if you’re in the top 2% of people who owe federal or state estate taxes (which is much more than 2%), you won’t be able to pay for the tax easily. In the 1990s, when Joe Robbie died, his family was forced to sell the Miami Dolphins franchise due to the $47 million in estate taxes that they owed. Yes, that’s correct. The federal government received the $47,000,000.
Your estate planning lawyer and/or your financial advisor will recommend that you purchase a whole policy of life insurance for tax purposes. If you have a large estate, you may need to purchase life insurance if you are facing significant taxes. Whole life insurance can be leveraged in estate planning. A whole life policy is a great way to maximize the value of your estate. You can avoid estate taxes if you have an annual net worth of more than $5.45 million or $10 million. A fixed trust is not only a good idea, but will save you money. Give us a ring if you want to know more about a whole-life insurance policy that will protect your assets. We would be happy to provide you with the best options.
3. Your child is a college student
Most parents with a college-age child are searching for policies that range from $100,000 up to $200,000 in order to cover their child’s expenses. These policies can be used to cover debts or to help your child get student loans.
If you compare the cost of a 20- to -30-year term life policy with the cost of whole life insurance, it’s often more affordable to purchase a cash value child life insurance that can be handed over to the child at a later date and the child will continue to make payments.
How about a 529 College Savings Plan and Whole Life Insurance?
A college savings plan encourages saving for future college costs. This plan, also called a qualified tuition program, is sponsored by state, educational institutions and state agencies. The Internal Revenue Code section 529 deals with this.
You can use your cash value from a whole life policy to fund a 529 plan instead. Whole life insurance will not impact your child’s FAFSA student loan application. You cannot use a 529 Plan to your liking and it can hurt your child’s eligibility for Federal Student Aid.
4. You Want To Buy Life Insurance For Your Children
If you are looking to purchase coverage for your children, a whole life policy may be the best option. Your children’s life insurance premiums are low when they’re young. Another bonus is the fact that whole life policies will grow the cash value. If you choose a term policy, ensure it offers conversion options. This will allow you to convert it to a permanent product such as a whole-life.
5. Charity
It is wonderful to give to a cause that you are passionate about. A whole life policy will ensure that your charitable goal does not vanish in 20 or 30 year’s time, as it might with term insurance. The premiums you pay for your whole life insurance policy may be tax-deductible, or if your estate is taxed, the deduction can be made.
6. When Grandparents Care for Their Grandchildren
Some grandparents start to look for life insurance in case they need to care for their grandchildren. If a grandparent is a young parent, they may purchase a policy on their child. Who would take care of their child if they were to die? Gerber Life is one of the most popular life insurance plans.
Gerber’s Grow Up Plan can be a good way to provide financial security for your child. This whole life policy provides benefits for life insurance up to $50,000, and it builds cash value with time.
They are worried that they would be the main caregivers for their grandchildren if you or your spouse were to die. Some grandparents choose a whole life with cash value that costs slightly more than a term life policy. They would rather have a more comprehensive policy than save money to buy a term life insurance for their grandchildren.
7. Diversification
Whole life insurance should never be used as an investment vehicle. The focus of the policy should always be to provide a life-insurance benefit. Some people, who have followed the advice of their financial advisors , still want to diversify as much as they can. It’s not a good reason to buy Whole Life but many people do.
8. Only Need Limited Coverage
Some people don’t need a costly life insurance policy. Some people do not need expensive life insurance policies. They are single, don’t have children and started looking into it later in life. They only want to make sure their burial costs will be covered. Why would someone pay a premium for only $3,000-$25,000 of life insurance coverage ? There are thousands of people who want smaller plans after hearing about them for many years.
Not all needs are the exact same. You may want to make sure that your burial costs are covered by the government, rather than having family members pay for them. You don’t want your friends to have to pay for the burial of your spouse if you are married. Burial Life Insurance should be something that you look into. Talk to your insurance agent about the best plan for your situation.
9. I don’t want to pay for the burial costs of a relative
It is common for people to worry that they will be responsible for the burial costs of their parents, siblings, or other relatives if they pass away. It makes sense to purchase a policy for their parents , so that they don’t have to pay out-of-pocket the costs of the funeral home.
10. You’ve been diagnosed with a medical condition
Many people did not buy a term insurance policy when they were healthy and young. They may have preexisting conditions or a health condition that makes it difficult to afford coverage now that they’re older. The policy was purchased too late or the term policy is about to expire. In essence, they cannot be insured with traditional policies.
They were diagnosed at a young, pre-existing age with cancer, type 1, type 2 diabetes or a congenital defect. You would be better off getting a whole life insurance policy than risking not qualifying for standard life insurance later.
11. Conversion Options
A convertible life insurance policy allows you to convert all or part of the face amount to a permanent insurance without having to undergo another medical examination or answer health questions. You can get the low-cost flexibility of term insurance and the protection of whole-life if you need it.
12. Your Family History
family histories are often easy to determine. You may have a family member who has been taking cholesterol medications since age 45.
Although cholesterol isn’t funny, it isn’t as serious as other diseases. For those who think they are at a higher risk of developing a disease as they age, purchasing a life insurance policy could be a wise decision. If you are concerned about a health condition that is not causing symptoms, you can choose a whole life policy with no medical exam.
13. You have a child with special needs.
You don’t have to give a lump sum of money for your special needs child. Instead, you can use a special needs trust set up by a third party. whole life is the best option if you have a special needs child, and a special needs trust.
Many parents have children with special needs, and are concerned about the care that will be provided for their child if they were to die. Many parents with special needs children will consider whole life insurance so that they don’t have to worry about outliving the policy.
Survivorship life insurance is an excellent, permanent policy that is much more affordable than coverage for both parents. This policy pays out the death benefit only after the last parent dies.
14. You are a business owner
If you own a business or company, you’ll want to ensure that your successor will be taken care of. Your partner’s family now shares ownership of your business. Should you purchase a term policy that is cheaper? What if you and your partner have been in business for over 30 years, and are no longer insured? The right life insurance policy will be crucial to your company.
Buy Sell Agreement is a legally binding agreement between co-owners and describes how the business will run if one owner dies, is asked to leave or decides to retire. A business may choose to purchase a permanent life insurance policy, such as an Indexed Universal Life Policy to cover the person in question. This is a better option than figuring out how long to keep it.
Another option is the Key Person Business Life Insurance Policy, which works well with whole-term or term life. This coverage is not one-size-fits all because there are so many different scenarios. Before making a decision, you should discuss all the options with your agent.
15. Only Whole Life Qualifies You
Many people are interested in whole life insurance, but what happens if they only qualify for one policy? Call us and we will help you find a policy with a cash-value whole life insurance that will meet your needs.
Many people are not eligible for term life coverage due to their medical condition. However, the Gerber Guaranteed life Insurance policy doesn’t require you to undergo a medical examination or answer many health questions. This is a great option to consider.