Shopping for insurance can be stressful. We will dive into the difference between term and whole life insurance
Learn the difference between term and whole life insurance.
How many types of life insurance are there?
When you’re shopping for life insurance there are two types of Life Insurance to look out for. These are namely term life insurance and whole life insurance. Before we dive into the difference between the two types of life insurance, it is important to understand what life insurance is. Life insurance is a legally binding contract between you and the insurance company that simply states that the insurance company will pay out a large amount of money in exchange for a small monthly premium in case of your death.
People typically don’t see the benefit of life insurance until it’s too late and you certainly don’t want to be one of those people.
As you can imagine, the word term implies a finite or short period of time while the word whole implies a longer period of time. This time-dependent difference also contributes to the difference in pricing for both types of life insurance. The purpose of this insurance resource is to help you find it easier to decide which life insurance policy is right for you and your family before you decide to reach out to an insurance agency. To get started, we will start by discussing what term life insurance is and then proceed to discuss what whole life insurance is shortly after. In addition, we will also go over the pros and cons of whole life insurance and term life insurance as well.
What is a Term Life Insurance?
What is term life insurance?
Term life insurance in a nutshell is a kind of life insurance that guarantees a payout if for any reason you pass away during the term of your policy. Example: If Sam signed up for a 12-year term life insurance policy and Sam passes away before the policy expires, the insurance will make a payout to the beneficiaries. If nothing happens and you did not develop any serious health problems, in most cases you will be eligible for policy renewal. Once you generate a serious illness, and you try to renew, one of two things might happen. One, the insurance company may deny your renewal application. Two, if the insurance company decides to renew, at this point in time since you are older and are a customer with pre-existing conditions, your premium might be higher.
How do I buy term life insurance?
How do I buy term life insurance?
If by now, you are confident that term life insurance is perfect for you, then it is crucial that you understand some of the steps involved with buying a term life insurance policy.
Step 1: Try to start working out, and practicing a healthy lifestyle before you even consider applying.
Step 2: Once you feel like your cardio is decent and you can run 1 mile without breaking a sweat, proceed to start gathering together your medical and personal information
Step 3: Start conducting your insurance company search. You can visit our top-rated life insurance company directory or just do a quick Google search.
Step 4: Once you find a company with a good reputation and strong finance, you can proceed to reach out to them. A.M like 10 best insurance company is another website that provides a rating for insurance companies. You want to select companies with a rating of A+ or A++ for a term less than 20 years.
Step 5: After selecting a company for your term life insurance, another important decision to make is the coverage. Your income, mortgage, and retirement timeline will play a role in your term life insurance coverage. A good judgment is to multiply your annual income by ten to determine a term life insurance coverage. It is recommended to consult your term life insurance company in terms of the term length of your coverage.
Step 6: Shop, shop, and shop some more. After selecting your top companies, you want to make sure that you get multiple quotes from all top insurance companies. Of course, at the end of the day, you want to make sure that you go with the best rated for the best price. Be sure that they also have a flexible, inexpensive, and reasonable renewal policy.
Step 7: After selecting a company, you will need a medical exam to get started. Once you pass your medical exam, your policy will be generated and you will be responsible for the monthly premium for the term of the contract.
Do I need term life insurance?
Do I need term life insurance?
YES! Yes, you do need term life insurance. If you are a vampire and can live forever, then you certainly do not need life insurance. If you are not a vampire or haven’t discovered the fountain of youth, then you certainly need a term life insurance. Term life insurance is a great way to protect your loved ones financially in case of an untimely death. Knock on wood! Keep on reading to find out the pros and cons of term life insurance.
Pros and cons of term life insurance
Below is a table showing some of the pros and cons of term life insurance.
| Pros of term life insurance | Cons of term life insurance |
|---|---|
| Your premium amount is lower when you are younger. | This insurance has a short lifespan. |
| It offers the guaranteed payout in an event you pass away before your policy expires. | You are not covered in a case where something happens after the policy expires. |
| It offers large payout in an event you pass away before your policy expires. | The policy does not build a cash value. |
| If you pass away before your policy expires, the capital payout can easily cover debt, loan funeral expenses and many more. | Your premium might increase when you renew. |
| You can also convert this into a whole life insurance. | Your premium will increase when you develop a health condition. |
What is whole life insurance?
What is whole life insurance?
Whole life insurance is a type of insurance that covers you for the remainder of your life provided you do not miss your premium payment. A lot of people prefer this option over the term life because there is no need to constantly renew the policy. Although slightly more expensive, whole life insurance offers one of the best ROI. Ex: if Joe signed up for whole life insurance, Joe would pay a fixed rate for the term of his policy and will never have the need to renew his policy. On top of this, Joe will also have access to something called Cash Value. Cash Value is like a savings account for life insurance. You can either withdraw the fund or borrow against it.
How do I buy whole life insurance?
How to purchase whole life insurance
The steps required to purchase whole life insurance is like the purchasing process for term life insurance. Listed below are some recommended steps that you can take to sign up for whole life insurance.
Step 1: Like term life insurance, you want to get your body in shape and also adopt a healthy lifestyle, to begin with.
Step 2: Figure out the amount of coverage that you wish to sign up for. Once again, you must factor in your income when making this decision. If you have kids and a spouse, you will have to factor them into the equation as well when determining how much coverage to get.
Step 3: Locate your top whole life insurance companies, and select the ones that match your budget, have solid finance, and are affordable.
Step 4: Schedule your insurance health exam. This is usually done at a time and location that is convenient for you. Furthermore, the insurance company typically covers the cost of the exam. The exam will usually cover blood work, weight and height checks, medical records, and some questions.
Step 5: The waiting game. Once you complete your exam and your application is turned in, the underwriter will be brought into the picture. The underwriter will be the one to factor in all the information about you including your medical test results and medical record to conclude if you can be insured and which insurance class to assign you to.
Step 6: Once everything is said and done and you are approved, you will be sent your policy and your first payment will be due.
Do I need whole life insurance?
Do you need whole life insurance?
Like term life insurance, you also need whole life insurance. You must decide between whole life insurance and term life insurance. Whole life insurance is especially more important if you have a family or plan on having a family. Below are some of the pros and cons of whole life insurance.
Pros and cons of whole life insurance
| Pros of whole life insurance | Cons of whole life insurance |
|---|---|
| Your policy is to bound to generate ROI when you pass away as long as you keep up with your premium. | This is far more expensive than the term insurance. |
| Your premium will not change regardless of how old you get. | This policy is far more complicated than the term life insurance. Although, the complexity could also act as a pro because it allows you to find a plan that is the best fit for you. |
| As you continue to pay your premium, you will also continue to build your cash value which you can take out or borrow against in the future. | This policy is for life and doesn’t offer the short-term benefit that term life insurance offers. |
| Depending on the company that you go with, your policy might pay a dividend. This dividend can then be used to pay your premium depending on how much it is. | |
| Finally, there are some tax benefits that whole life insurance also offers. You do not need to pay tax on the growth of your cash value. Also the benefits paid after your passing is also tax-free. |
Top 7 Factors that can affect your life insurance rate
· Age
· Gender
· Smoking
· Health
· Lifestyle
· Family medical history
· Driving record