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Whole and Term Life Insurance Explanation

Term Life Insurance: Term Life Insurance is exactly what it sounds like. It is life insurance for a set time period—called the “term—during which your premium and face value (the amount paid to a beneficiary if you die) remain unchanged. The rates are generally low in cost even for high face value amounts, largely because the company has very low risk. On the average, very few people die during the initial period of a Term policy. Sure, it happens, but the average person who purchases a Term policy outlives it.

Many people are confused because they have term policies that say “renewable to age 85” or some similar age. That does not mean the policy will be unchanged to 85. The premium will increase yearly after the initial term. The renewability clause simply means that at age 95, you can no longer renew it at any price.  

Whole Life Insurance: Like Term Life, whole life insurance is just what it sounds like. You are insured for your “whole life” with premiums and a face value that will not change. The premium is higher because the company knows that at some point they will definitely be paying out the face value. After all, everybody dies eventually. The older you are, the more likely you are to die before the company has a chance to cover their risk, thus the premiums are higher for older people. The policy does, however build cash value; this actual cash (your premium plus interest) will equal the face value if you live to the age of endowment—usually 100.

Which type of Insurance is better? Life insurance is not a one-size-fits-all commodity. If you have no heirs or family members and have already made plans for how your final expenses will be covered, a policy that covers you for 10 to 20 years may suit just fine. If, however, you expect to have a large estate, want to leave a legacy to your family or favorite charity, or want to have a means of increasing or protecting your retirement assets, you should choose whole life.   

Before stopping with a "cheap" Term policy, you may want to consider some other issues. For example, many people who start with a Term develop chronic health issues which prevent them from getting a whole life policy later on. Also, some people make the mistake of thinking that they don’t need life insurance because they have an IRA which their heirs will inherit and which will pay final expenses. This assumption will likely create a problem for your heirs as a distribution of the IRA in that fashion will immediately trigger a taxable event of proportions that will leave your heirs with far less money than you might expect. A whole life policy can protect not only your family in the short term, but can also contribute to your assets, increase your retirement, and protect your IRA itself, making your life’s work accomplish much more of what you would want.

Finding cheap, yet high quality life insurance just became easier!

If you are in need of a painless way to search for life insurance, you have just found the solution. Although we are not an insurance company and do not actually provide quotes directly, we do help provide you with some of the best in the business as well as connecting with a company that will meet your needs.

Your first step is to complete our easy quote search form, enabling us to connect you with some of the best professionals in our network. A licensed agent will call you and briefly discuss additional details that would contribute to the rates available to you. It will also be to your advantage to make an appointment with the agent or agents that seem to have what you want. That way you can ask questions in person, take notes, get to know the person who will represent you, and create a relationship that will have a life-long impact on protecting your family.

While waiting for your contact, you can use our site to educate yourself on some of the most important life insurance concepts. You will find numerous links on our site that discuss nearly any type of insurance.

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