Life insurance can be an issue many people prefer to avoid. After all, one's mortality is not always the most popular of topics of discussion.
The problem with avoiding the issue altogether is that life insurance can be a key factor in the financial security of those left behind after the tragic loss of a loved one, especially if that person is the primary income earner in the home.
The question for those who consider buying life insurance is rarely whether or not it is wise to buy it, but whether to purchase coverage of one's whole life, or that of a few decades.
About Whole Life Policies
Whole life insurance is a great vehicle with many benefits. Benefits include dividends, cash value, and the ability to borrow against the cash value that accrues.
If a man under 30 years old purchased a whole life policy of $100,000 today, he could purchase it for about $150 a month. If he dies the day his policy goes active, his beneficiary would receive the entire amount of $100,000. If he was to die 50 years later, that same $100,000 would be paid out.
During the course of having the policy, the insured may receive dividends paid out in cash, and will build up a cash value that will be returned in full if he lives too far beyond the period of insurance, which is often at the age of 95 or 100.
About Term Life Policies
Term life insurance is another great vehicle. Where it lacks in benefits, it makes up for in savings.
The same man that purchases a whole life policy for $150 a month will pay less than $10 a month for the same coverage on a term life plan. The difference is that the plan expires as per the contract, which is commonly 20 years long.
Why Choose Whole Life Insurance
Whole life insurance is expensive compared to term life, but the feeling of security over a lifetime through the policy is often encouraging to those who buy it. Also, for those with long family histories of illness, a term policy may prove to be too expensive to hold when the first term ends and a new one begins.
While many people today are not able to find the room for saving or investing, whole life policies may prove to offer the vehicle they need in order to put money away for an emergency, such as surgery.
Also, while paying for the policy may be relatively expensive, it can be offset with potential dividends. And, for many, peace of mind is worth the price.
Why Choose Term Life Insurance
While whole life may offer benefits that term life policies do not, those who purchase term policies can have them without their insurance agent reaping commissions off of them.
For example, if a person with a term policy was paying $10 each month for a $100,000 policy that would expire in 20 years, she could take the difference of $140 and save or invest it.
If she was to stick it under her mattress it would accumulate to $33,600 over the 20 year term and $67,200 at retirement. If she put the money into a CD and let it roll over every year at 3% for that same amount, it would come to $45,100 after 20 years and $126,600 after 40, allowing for her to realize the concept of being self insured at only a 3% gain!
Choosing whole life or term life insurance can be daunting. When it is done, it should be tailored to the comfort and budget of everyone involved, because either plan can lead to security in the event of one's passing, and no insurance at all can be devastating.