When searching for life insurance, there are two major forms to consider: Term and Whole Life. Everyone needs life insurance, but many people have a hard time figuring out how to choose a policy. Both have their own benefits and drawbacks, and it is important to understand those in order to select the type of policy that best fits your family’s needs. At Arthur Blake Insurance, our agents take the time to really understand our clients’ individual situations, needs, and goals, and we custom tailor our life insurance policies specifically to them. If you’re uncertain whether Term Life or Whole Life insurance is the right choice for you and your family, give us a call today.
Term Life Insurance
In general, term life insurance is rather simple to understand. A term life insurance policy will offer a death benefit to be paid out to a beneficiary if the policyholder dies within a specific amount of time (the term). Typically, these terms are either 10, 20, or 30 years in length. The major benefit of term insurance is that the premium (cost of the insurance) is relatively low, so it is easier to buy more of it. The premium will also always remain the same throughout the policy term.
A drawback, however, is that after a term ends, each term after will be more expensive. This is due to you being 10, 20, or 30 years older than the last time you purchased a term policy.
When you are shopping for term life insurance, there are a few major things to consider:
- What length of term will best fit my family’s needs?
- How much would my family need to keep their current lifestyle if something was to happen to the primary earner in the family?
- What will I do after my policy term expires?
Whole Life Insurance
As the name implies, whole life insurance will last for your entire life.
Like term insurance, whole life insurance has a premium that will always remain the same, but it is typically higher than that of term life insurance. The main reason why is that not only will you definitely use that insurance at some point in time, but that there is also an investment component in whole life insurance policies. Whole life insurance has what is called “cash-value” and that value grows at a guaranteed rate throughout the entire life of the policy. This means that over time you can borrow money against the policy, or surrender it for the cash value of the policy. However, one major thing to remember is that if you do not repay the loan that you took out on the policy, plus interest, that amount will be subtracted from the death benefit.
Another major benefit to whole life policies is the chance that you will be eligible to receive annual dividends from your insurer. Dividends are the leftover funds that were not paid out by the insurance company that year. However, unlike the death benefit, dividends are not guaranteed.
Things to consider when shopping for whole life insurance:
- How much would my family need to keep their current lifestyle if something was to happen to the primary earner in the family?
- How much cash value will each policy accrue over time?
- Do I have a beneficiary who will need the security of the death benefit throughout my entire life?
Term and whole life are both viable options on their own, but another option is to be covered by a combination of the two policy types. This will allow you to take advantage of the benefits of both policies.
Another thing to keep in mind is that some insurers offer the option to convert their term policies into whole life policies over time. This feature allows you to purchase cheaper term insurance upfront, and slowly gain more whole life insurance when you have the funds to afford it.
While it is important to know whether term or whole life insurance fits your needs best, the most important thing to do is to make sure you have some sort of life insurance plan in place. Because EVERYONE who does not have life insurance will want it when they need it. If you have questions about what life insurance is right for you and your family, contact Arthur Blake Insurance for a free consultation and review. As an independent insurance brokerage, our first and only responsibility is to our clients.