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Whole life vs. Term Life Insurance

With life insurance, you can relax knowing that your loved ones won’t suffer financially in the event of your passing.
Term life insurance has a time limit and is the least expensive kind of life insurance. On the other hand, whole life insurance is more costly but can offer long-term financial security.
Both term and whole life insurance policies provide a guaranteed death benefit. Nonetheless, there are significant distinctions between these policies.
The term life insurance policy derives its name from the fact that it expires after a set period. Beneficiaries usually receive a payment if the policyholder dies before the term expires.
If the policyholder were to pass away unexpectedly during the contestability period, the policy would be voided, which can last up to two years. During this period, the company reserves the right to thoroughly review your coverage before making a payout. Because it is not a term life insurance policy, it is a less expensive option when compared to whole life insurance. Whole life insurance is valid for the insured’s entire life.
Whole life insurance policies, like other types of permanent life insurance (such as variable and universal life insurance), consist of the death benefit and the cash value. Some of your premia go toward funding the cash value feature. You can borrow from it at any point in your lifetime.
Over time, the cash value of your whole life insurance policy will increase. The insurance company guarantees this according to a formula. The cash value of other types of permanent life insurance is not guaranteed. It is determined by other factors, such as current insurance rates. Some whole life insurance companies will even guarantee an annual rate of return on the policy’s cash value. If whole life insurance is like purchasing peace of mind, term life insurance is like renting it. To help you choose the right life insurance policy for your budget, we’ve provided some comparisons between term and whole-life policies. Policy terms represent the length of time that the policy, and thus the coverage, is in effect. When an insured person purchases insurance, they pay a set amount each month, called a premium. The agreed-upon life insurance premium is paid regularly, usually monthly. The death benefit of an insurance policy is the amount paid to the beneficiaries in the event of the insured’s death. Essentially, it is the monetary amount your family will receive if you die while your policy is still in effect. Your circumstances, including your family, living situation, and financial resources, will significantly guide your choice.
It makes perfect sense to obtain term life insurance while you are paying off any loan, including a mortgage if you are in the position to do so. Let’s say you’ve tried every other investment strategy there is. If this applies to you, purchasing whole life insurance could be a smart move to make the distribution of your estate easier after your passing. Speaking with a financial planner can always help you make an informed decision.
When comparing life insurance options, keep the following points in mind:
If you need coverage immediately but haven’t decided on a policy type, consider term life with a conversion rider. You will then be able to convert it to whole life. If in doubt, seek the advice of a qualified insurance agent.
If you’ve aged in the years since you first purchased your term life policy, you might want a more robust policy. Typically, no medical examination is required during this process.
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Bio:
30 + years as a Financial Planner. Securities (Series 1,7, and 65) and Insurance Licensed. Retirement Planning including the actual planning of where your income will come from as well as a discussion of products to get you there. The market has been volatile since Covid broke out and many people are not comfortable with this. If you are retired we will look at your total income and tax situation. If you are still working we have some more time to plan.

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Thomas Sweet

Thomas Sweet has 30 + years as a Financial Planner. Securities (Series 1,7, and 65) and Insurance Licensed. Retirement Planning including the actual planning of where your income will come from as well as a discussion of products to get you there. The market has been volatile since Covid broke out and many people are not comfortable with this. If you are retired we will look at your total income and tax situation. If you are still working we have some more time to plan.

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