When To Buy Term Life Insurance
Term life is by far the most popular form of life insurance on the market today. One of the primary reasons is that it is eminently affordable.
If your goal in buying life insurance is simply to guard against your family member or other beneficiary suffering financially due to your untimely, unexpected demise, then term life makes sense.
Or, if you’re worried that if you “die early” your survivors will lose their home, term policies can cover you up until the mortgage is fully paid off.
And there are others uses of term life too, like providing interim coverage until you can afford a whole life policy, providing coverage while you’re between jobs (if your past and future employer provide a life insurance benefit), or a term policy can can be used to protect your business and be scheduled to end right when you plan to retire.
When To Buy Whole Life Insurance
Whole life is a lot more expensive than term, but its death benefit is guaranteed regardless of how long you live – so long as you pay the premiums.
Remember that term life is cheaper because most people will outlive the policy – it provides only temporary protection during a certain period. But whole life provides permanent protection.
Also, whole life builds cash value, and you can actually borrow against that cash value in a financial pinch.
Finally, whole life acts as a tax shelter and allows you to pass on a portion of your estate to your heirs tax free.
When Term Plus Whole Makes Sense
Most people invest in only one life insurance policy at a time. But, there are a few situations where buying both term and whole life might be advantageous.
First, combining the two is a way to balance costs and risks. Let’s say you can’t afford as much whole life as you’d like. So you buy a 20-year term life policy that pays $150,000 and a whole life policy that also pays the same. Thus, if you pass away at a time particularly difficult (financially) for you family, they collect $300,000. Otherwise, they still collect $150,000.
Second, maybe you are taking on temporary extra financial obligations. You’re paying off a house, an expensive car, or a college loan. If you already have whole, just add a 5, 10, or 15 year term policy to provide extra coverage until those financial obligations lapse.
Third, many people begin with term life because its more affordable and then add whole life later. But you don’t necessarily want to cancel your term policy and lose the value you’ve put into it.
Buying life insurance can be a complex decision. For helpful advice on term and whole life and more, feel free to contact Flagler County (FL) Insurance Agency for a free consultation!