Term vs. Whole Life Insurance - Which Is Best For You?
It seems like every time you turn around someone is talking about life insurance. You may have been asked to sign up for it at your job, or some other financial service company contacted you and pressured you into buying a policy. It can be so difficult to know which type to choose that many people just settle for the first one they’re told about without ever reading the fine print.
No need to worry! We’ve put together this post all about Term vs. Whole Life Insurance coverages so that you can make an informed decision on what type of coverage will work best with your needs.
Whole Life vs. Term Insurance – What’s the Difference?
Life insurance is a type of financial protection that provides a death benefit upon payment of the premiums. If a person purchases a policy, they can use the proceeds to help pay for their debts or other expenses after their death. Ask yourself this question: How many years do I plan to live? Then choose whether you want whole life insurance, term life insurance, or disability insurance. The time frame can greatly impact your decision. Here are some of the main differences between each type: Whole Life Insurance – This type of coverage gives you death benefits for as long as you live (as long as you pay premiums). Some policies offer savings options where you can invest your money. Term Life Insurance – You pay the same amount of monthly premiums over a specified period of time (term), and then the coverage ends, whether you die or not. Disability Insurance – This is written for an individual and pays out a large lump sum to help with medical costs if the policyholder becomes disabled.
You can use the chart above as a quick reference guide as we go through each type of policy in more detail below.
If you decide that either type of insurance is best for you, there are plenty of online resources that will help you find the right fit.
You’ll probably want to look at several different companies, and you may want to read some unbiased articles that have been written on the type of coverage you are seeking.
Social media can also be a great way to find out which companies have gotten the best reviews for your area.
For example, if you live in California or some other populous state, odds are that there will be hundreds of life insurance agents and financial service companies vying for your business.
What you want to do is find an agency that specializes in life insurance. There are different types of companies that sell life insurance and each one will have a different approach.
You’ll want to look for a company that hires agents who are friendly, knowledgeable, and passionate about helping families protect their loved ones.
The agent should know all the financial products available to reduce your risk. Look for an agent who has had experience with the policy(s) you are considering as well as the company offering them.
If possible, get there before or after office hours so you can speak directly with the agent and ask questions about how they would handle a specific situation. An agent who will answer your questions honestly will be most helpful.
Ask the agent to explain why a particular policy is better than other options. If they simply try to sell you a policy without giving you any information, be wary.
The whole point of an agency is to help people like you make smart choices about your life. They should also offer unbiased advice so that you can make an informed decision about which financial product works best for your needs.
An honest agent will tell you if there are any drawbacks with the policies they offer and will stress that there is no one-size-fits-all approach. The objective here is to find out what your needs are and then match them with a suitable plan.
If you decide to purchase through an agent, make sure you get a copy of the contract in writing. If they don’t provide you with a copy, then ask for one and walk away if they refuse to give it to you.
If you decide to purchase through an online broker, you may have to go through the application process several times, on several different websites, until you find one that’s right for you. It can be extremely frustrating. Don’t settle for a policy because of convenience and cost alone if there are better options available.
Also avoid companies that try to sell life insurance as an investment opportunity. Life Insurance is not an investment. You are not investing in a piece of paper. You are paying a monthly premium to stand behind the life of another person. It is not an investment, it is a real and tangible product that you pay for once then receive in the future as long as payments continue.
Don't make the mistake of going with just any company or agent who comes to you or calls you on the phone. Your decision should be based on research and personal experience, not pressure sales tactics.
The best way to get an honest policy from an agent will be to ask questions until you find one that explains finances in a way that makes sense to you. Then, and only then, should you consider paying them a premium to handle your life insurance needs.
Whole Life vs. Term – What’s the Difference?
Even though they are similar on the surface, whole life and term insurance have some major differences that can really affect how much you pay per month for coverage.
When you buy a whole life insurance policy, you may actually be able to get one that’s cheaper per month than the term insurance offered by the same company.
It’s important to know how this works because if you are not happy with the savings, then you can always try for a new plan. If, however, your current plan is more than enough for your needs at a lower premium cost, then it might be best to stick with it.
If you do decide that a lower cost per month option is available on your current policy, be sure to ask what type of protection they provide (death/disease or disability). There's no need to switch policies just because they have different names or descriptions.
Conclusion
You probably already know that life insurance is a good investment for your family. You also probably already know that insurance companies earn money when you buy a policy. You also probably already know that different types of life insurance policies cost different amounts per month, although it can be confusing to understand exactly how much you pay.
This guide will help you learn about the three main types of life insurance and make sure you are getting the best coverage at the best possible price. It’s also important to understand that once you get a policy, it doesn’t matter what type of financial or medical information they have about you when they sell your life insurance, it only matters what happens after a certain period has passed.