First let me start with broad definitions of the different forms of life insurance. Though there are many forms of life insurance, I shall touch on two in particular: term life insurance and whole life insurance.
Term Life Insurance is exactly what the name implies, life insurance that only lasts for a set term determined in your contract. Term life insurance is the most advertised of available life insurances due to its cheaper premiums. Term life insurance is relatively cheap depending on your age and your medical history and you receive a high face value for your premiums. Most people, however, are not aware of the two downfalls to term life insurance. First of all, once your term is up you will not be able to collect on the face value and no longer have life insurance unless you choose to renew or purchase another policy. Secondly, a term life policy builds no cash value, which will be discussed in further detail later. Despite the two downfalls with term life insurance, it still serves a purpose and benefits particular situations. A benefit of term life insurance we already touched on was price. Term life insurance allows you to get high face values for a relatively cheap price, benefiting you while you have a mortgage on your house, repaying your students loans, or other debt you may be working hard to repay.
Whole Life Insurance is slightly different and typically misunderstood. Everyday people shop around for auto insurance to see if they can save money or find an agent that will protect their car and make sure they are covered. People spend hours shopping around for auto insurance and hardly anytime thinking about life insurance when whole life insurance is the only thing you are guaranteed to collect on, whether it be yourself or your primary beneficiary.Although whole life insurance does cost more than term life insurance there are ways to make whole life insurance more affordable for you and your family.
One way to keep the cost for whole life insurance down is by getting a policy before your next birthday. The longer you wait the more expensive whole life becomes because not only are you getting older but you also develop more medical conditions and possibly life threatening diseases. In fact, putting a whole life policy on a child at birth or when they are that young allows you to receive exteremly cheap premiums that will not change over the course of a lifetime and it insures the child for their entire life.
Purchasing a whole life policy at a young age not only locks in a cheap premium but could also contribute to a college fund or possibly even a house fund. This is because your whole life policy builds what’s called “cash value”. Cash value is exclusive to whole life policies and is the living benefit of having a whole life policy. Once you have paid your premium for three years on your policy you start to accumulate cash value that you can withdraw at any time with no penalty. For instance, if you insure your child at age one and at age eighteen they are going to college they can withdraw all the cash value their policy has accumulated to help pay for the costs of college and not have to repay the money to their life policy. The cash value is their money and they can use it in whatever way they see fit without fear of penalties or repayment. Another advantage of getting your child a whole life policy at a young age is they are guaranteed a life insurance policy for the rest of their life. Even if, as the child ages, they develop a serious condition or other factors that would otherwise make them uninsurable they will still retain their whole life policy.
Commonly parents are unsure of whether or not the initial whole life value will be enough for their child. They worry they might need more then what they are currently insured for as they age. Fortunatly, on a whole life policy you have an option to place a “guaranteed insurability rider” on the policy. This rider allows your child to request face value increases at certain ages to help keep up with their changing lives and there is no medical testing necessary for these increases. While the premium will go up due to the increase in face value, it will not increase due to any new medical developments.
If you want to look up a list of additional benefits for whole life insurance and its purpose you can search for videos about families that took out a whole life policy and are extremely happy they did when the unexpected occurred. However, I will warn you though to have a box of tissues close by. I am not trying to convince you to go buy life insurance today, tomorrow, or at all. I am merely here to inform you about its costs and benefits so you can make the right decision for yourself and your family.
If you want more details or clarification on any topic discussed feel free to call myself or your current agent. One important note is that some of these policies are different between companies so again be sure to speak with your agent to make sure you get the coverage you would like.