Say the words “life insurance” and most people will scatter faster than you can say multi-level marketing! Why is that? They’ve either been sold or over promised or made to feel guilty or scared by people that should be there to help them. The goal in our blog is to demystify, explain and empower each person so they can make informed decisions that are in their best interest.
So far in our discussions that have led us up to here, we’ve presented;
- Three questions you need to answer before shopping for insurance (http://bit.ly/XDHoGu)
- Which member of a couple should have a life insurance policy (http://bit.ly/Qcg1Bl)
- Should you buy life insurance for your children (http://bit.ly/RWAzuo)
Let’s now move into contrasting the two broad categories of life insurance policy types;
- Term life insurance
- Permanent life insurance
Term life insurance is insurance that lasts for a period of time, or for a term. Policy term lengths vary by company but typically are;
- 1 year
- 5 years
- 10 years
- 15 years
- 20 years
- 30 years
At the end of the term the policy may either ends or renews automatically depending on how the policy is set up. If it renews automatically, then it will renew at a premium based on your new / current age.
The benefits of term are it’s;
- Ability to maximize your coverage
- Minimize your cost
Bottom line, you can get more for less money. If there’s a downside, it’s that at some point the policy will end. Keeping that in mind, I believe this simply requires a little more planning on the part of the buyer. Their options are;
- Purchase new policies in later years to take over for policies that are going to expire
- Convert a portion of the term policy to a permanent policy to take care of final expenses
- Ultimately if the individual or couple is following a financial plan where they minimize debt and grow their investments, the need for a large amount of life insurance may be less in later years
In addition to term life insurance, there is permanent life insurance. There are two broad categories of permanent life insurance;
- Whole life
- Universal life
Since universal life is a mixture of term and whole life, we’ll focus on whole life in this post and circle back to universal life in a future post.
Whole life is designed to be there for a person’s whole or entire life. Some points to note on whole life are;
- Protection for a person’s entire or whole life as long as sufficient premiums are paid
- Can build equity in the form of a cash value
- Higher premium than term either for the life of the policy or initially depending on how the policy is structured
The biggest advantage of whole life is that it can remain in force, as long as the policy holder pays the premium, up to the age of 100 or more.
I’m currently working with a couple of people regarding life insurance for them. In both cases we’re dealing with adult men age 30 or 31, great health, and they don’t smoke. A term rate for $100,000 in coverage runs between $13 and $15 a month. A whole life policy for less coverage runs double that or more ($25 to $35 a month). They chose or are choosing term.
Which one is right for you? Our recommendation is term insurance so there’s money to build your portfolio with the aid of a financial plan. Following that is not without its challenges, but it can be done, successfully, over time. Whether you agree or disagree, share your thoughts in the comments section or on our Facebook page. Want a quote, email me at ed.wise@wiseinsurancegroup.com and we’ll get one tailored just for you!
