Life is complicated, insurance doesn't have to be.
You know those decisions in life that make you look back and think to yourself,
If only I had known more...
What in the world was I thinking?
We all have one. While it’s not as scandalous as getting a
regrettable tattoo, life insurance is a big decision that, with a
little research, doesn’t have to be one we regret.
In fact, 65% of consumers with life insurance say they are
able to enjoy life more knowing their loved ones are financially
protected with life insurance (2019 Insure Your Love Consumer
Survey, Life Happens).
The key is selecting the best life insurance for your
situation. You will likely end up choosing between Whole Life
insurance vs Term Life insurance.
Life insurance is often called “permanent” because you’re
covered up to a specified age, usually 100 years and up for newer
policies. If you live beyond this age, your coverage will end but
you will receive the cash value of your policy.
Whole Life policies build cash value from your premium
payments. Part of your payment covers your cost of insurance, and
the rest goes towards building your cash value. Your cash value
builds at the guaranteed interest rate assigned when you purchase
As the cash value builds, some customers use it as a loan to
pay for college, homes, etc. This loan doesn't require you to pay
back the principle but will decrease the death benefit of your
policy. Keep in mind you will be charged interest payments on the loan.
You will either make equal premium payments for the duration
of the policy, or you can choose an accelerated option to pay your
policy off sooner - such as Ten Pay and Single Pay options. These
will allow you to pay off the policy in either one (Single Pay) or
10 years of payments (Ten Pay). Once paid, it will offer coverage
until the specified age.
Retiring adults often choose Whole Life because it offers
permanent coverage. By comparison, Term policies have an end date
that may occur at a point in the customer’s life when they aren’t
as insurable. So, they opt for Whole Life, permanent coverage.
When you buy a Term Life insurance policy, you
choose the amount of time you want life insurance coverage. 10, 20 and
30 years are common options. When the term you select is over you will
no longer have coverage unless you choose to continue with costly
Yearly Renewable Term rates.
There is no cash value on a Term Policy.
You will make equal premium payments for the duration of the
policy. For example, if you choose a 20-year term you will make
payments for 20 years. At the end of the term, your coverage options
are limited and no cash value is given.
young families typically have debt and dependents,
their priority is making sure these are covered rather than
legacy planning. Also, since they are younger they are more
insurable and can purchase insurance at a better, cheaper
Many insurance agents may recommend young
families consider purchasing both a Term and a Whole Life
policy; a Term policy to cover the majority of their debt
and a small, Whole Life policy to cover their final expenses
and legacy planning.
This combination can be advantageous because the Term policy
will meet their immediate needs and the Whole Life policy will serve
as a safeguard for their insurability.
For example, if you have a 30-year term policy and during
those 30 years you’re diagnosed with diabetes, your insurability
drastically changes. When your 30-year Term Life policy is over, you
may not be able to purchase another term of insurance. But, if you
had a small Whole Life policy, you would have coverage until the
specified age regardless of the changes to your insurability.
The Gift of Life Insurance for Children
Overall, your best course of action is to secure your life
insurance sooner rather than later. This is a great way to ensure your
insurability at the best rates. The best life insurance is the
insurance in force at the time of claim.
*Products referenced may not be
approved/available in all states. Limitations and conditions
may apply. Premium will be based on benefits chosen and
policy rates available at time of application.
Disclaimer: This article is not expert advice.
The analysis of coverage is in general terms and is
superseded in all respects by the Insuring Agreements,
Endorsements, Exclusions, Terms and Conditions of the
Policy. Some of the coverage mentioned in this
material may not be applicable in all states or may have to
be modified to conform to applicable state law. Some
coverages may have been eliminated or modified since
the publishing of this material. Discounts may not
be available in all states. Limitations and conditions may
apply. Premiums will be based on benefits chosen. Please
check with your local Independent Auto-Owners Insurance
Agent for details."
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