Individuals with specific circumstances, such as high earners who may need to invest in additional vehicles or people with long-term dependents, will benefit from whole life insurance.
Both policies allow your loved ones to spend the death benefit on funeral expenses and mortgage payments. The type of coverage you need may make one option better than the others.
There are many options to choose from when it comes to buying life insurance policies that will protect your family. Whole life insurance can be purchased for a long time and has a cash-value savings feature. Policies premiums can be up to 15 times more costly than term insurance. This is because it lasts only until the set expiration date, and doesn't have any cash value.
As life changes, so too does your need to have financial protection. Consider whole life insurance if any of the following items can be related to you.
Your age, your health, and the length of time you plan on paying premiums will determine which whole-life insurance rate is best for you.
Whole life insurance rates can be more expensive than term life insurance. If you require life insurance that doesn't expire or has cash value, the price may be worth it.
The accumulated capital value is yours to spend on things such as these or other retirement income needs.2 However, whole life insurance does not provide an investment or retirement plan. However, your policy's cash can be used to diversify your portfolio or provide additional security for your family.
The cash value is the amount of interest that this account earns over time. You can take out or borrow money against it. Although it will not grow as fast as standard investments, it is an easier, tax-deferred way to invest. The breakeven point, when cash value exceeds cumulative premiums, can take between 10-20 years. Therefore, if you're older, it might make less sense to purchase a new cash-value policy.
For everyone else, a term insurance policy is better. It's cheaper for the same coverage and provides the same protection for your loved ones. Whole life, as an investment vehicle, doesn't return as high as traditional investment accounts like a 401k and IRA. An agent can help you determine the best type of insurance for you.
Term life insurance works like this: It covers you only for a specified time (10-20 years) and pays out when you die. Your beneficiaries do not get any money if it ends before you reach the end of the tour. Most policies have a death benefit, and your insurance premiums remain the same through the term.
The cash value: This account accumulates interest over time. You have the option to withdraw from it or make a loan against. This investment is not as rapid as a regular investment but can grow steadily and be tax-deferred. The normal breakeven point (when cash values exceed cumulative premiums paid), can take between 10 and 20 year. So, the older you get, the less it makes sense to buy a new policy with cash value.
Whole life insurance rates tend to be higher than those for term life insurance. However, if you are looking for life insurance that doesn't expire and has cash value, it may be worth the extra cost.
The death benefit is the amount your loved ones can spend on funeral expenses, mortgage payments and college tuition. However, depending on what your coverage needs are, one type of insurance may be more suitable than the other.
