” I want permanent Whole Life Insurance.”
” I don’t want term where it only lasts for a temporary amount of time.”
” What happens to the payout if I don’t die within the term period (10, 15, 20, 25, 30 years)?”
” What happens to all the money I paid for my policy over time?”
These are only some of the common responses I get from clients when deciding between a whole life policy as opposed to a term policy. The million dollar question we will be attempting to answer today is… When does Whole Life Insurance Make Sense to purchase?
Sigh…. Where do I start?
You know what. I think I’ll start by saying that 80% of Americans SHOULD HAVE LIFE INSURANCE NO MATTER WHAT AGE THEY ARE. This opinion includes the children we can see on GoFundMe who’s parents didn’t think it could happen to them. Now the families of the deceased are trying to raise the funds necessary to provide a proper burial for little Man-Man).
No one wants to talk about Life Insurance because it puts bad karma on their life. If they purchase it, they are now going to die before Jesus comes back to rapture them (yeah I said it!!!). It is a known fact (you can even ask Google) that 100% of the living… WILL DIE SOMEDAY.. We just don’t when that day will be.
After the previous rant, I will continue explaining the difference between Whole Life and Term Insurance for those who may be unfamiliar with the terms.
Life Insurance that pays a benefit on the death of the insured and also accumulates a cash value. Thanks Google, I couldn’t have said it better myself. It is also permanent insurance that is guaranteed to be more expensive than the term option for the same coverage. The owner can borrow money from the cash value as tax-free income, and don’t have to pay it back until death. At that point, the unpaid money borrowed, plus any interest accumulated (if applicable), will be subtracted from the death benefit that will be paid to the beneficiary.
Life insurance that pays a benefit in the event of the death of the insured during a specified term. Hence the keyword… Term. Term coverage is temporary. It gives someone a large amount of insurance, for a fraction of the price they’d pay in the Whole Life Policy. Some use the term “Pure Life Insurance.” For example, me being 29 years old, in perfectly good health, can get a $1 Million dollar policy for roughly $80/mo. A whole Life policy for the same payout would cost me over $800/mo.
Now that we understand the difference between the two policies, let’s get back to the purpose of the Article…
There are a few things that I consider when determining if Whole Life is a good fit for my clients. Some of them are listed below:
As this blog is being written…
For the majority of America, median income is about $54,000 per household; according to NerdWallet.com. Term Insurance is a much more cost effective option. The extra money you would contribute to a whole life insurance for the same coverage could be adding to an investment that would be much cheaper than the cost of investing within a whole life policy.
Whole Life is best suited for:
In addition, the next question is for parents who are just getting started with home ownership, kids, careers, and education. How are you going to be able to equip your family with enough insurance to support your family if you’re not there to keep working? Term is the recommended option for those who are at the peak of their lives and have a lot of responsibilities to cover.
It’s a lot to think about… I have a headache just by writing this article and I’m a financial advisor. Imagine the level of difficulty for the average person just trying to protect their family.
But I will close (in my pastor’s voice) by leaving you with this one question/answer….
What do you think is you’re biggest asset?
It’s not your house… Not your car… Not your kids…. But it’s YOU!!! You’re ability to make money and provide a lifestyle for your family to live the way you planned or intended.
Either get some coverage immediately or contact one of our advisors to review your policy to ensure you have the right plan for you and your family.