Learn about the differences so you can make the best decision for your family
The whole concept of insurance is based on the “what if?” premise. With so many chances for calamity (both big and small) when you leave your home, insurance lets you live your life knowing you have some financial safeguards in place to protect your family. This peace of mind is perhaps best exemplified with life insurance.
Nobody wants to think about their ultimate demise, but we all know it will happen eventually. And although life expectancy in the U.S. had been climbing for decades, the trend has recently reversed in the first sustained decline since World War I. A recent report shows that factors like obesity, chronic diseases, and drug use greatly contribute to preventable deaths.
These are some of the reasons that having life insurance is so important, and there are two general options to consider: term life and whole life:
What is term life insurance?
As the name implies, term life insurance offers coverage for a specific period of time. Usually, these terms are 10, 20, or 30 years. When someone buys term life insurance, they decide what the payout would be – say, $500,000 – and that will remain the same throughout the length of the policy. This option is often chosen by people with young families; after 20 years, for example, presumably kids will be out living on their own and wouldn’t need the safety net.
What is whole life insurance?
Whole life insurance provides permanent coverage for as long as someone lives. Unlike term life insurance, a whole life policy has a cash value that grows over time. Some of these policies can come with annual dividends which can be taken in cash, used to decrease premiums, or buy extra coverage. With whole life, you can borrow against the account, but if loans aren’t repaid with interest, the death benefit is reduced.
How do you know which is the better option?
Getting the right type of life insurance is important, which is why there are a lot of considerations to make when picking a policy.
Why buy term life insurance?
Term life insurance is a good choice if you’re looking for coverage for a certain number of years and don’t want to spend a lot of money. For young and healthy people, this can be very affordable. The average cost of a 20-year term life insurance policy with a $500,000 payout for a 30-year-old non-smoker is less than $24 per month. Switching to whole life insurance, later on, may also be an option, as many term life policies can be converted to permanent coverage.
Why buy whole life insurance?
Clearly, the biggest reason to go with whole life insurance is that it offers coverage for the rest of your life. Even if you’re not supporting anyone when you pass away, this policy will provide money for things like funeral expenses and estate taxes. This could be a good way to leave an inheritance without having to worry about using your retirement savings. Another reason to choose whole life is if you have a child with special needs who will require lifelong care. A whole life policy can fund a trust that will ensure he or she gets adequate financial support after you are gone.
Not sure which type of life insurance is right for you?
Life insurance can be confusing, but it doesn’t need to be. For clear and concise answers, get in touch with NICRIS Insurance. One of our pros will gladly discuss each option and help you figure out which is best. To get started, call us at 516-544-0006. You can also reach us through our online contact form.