If you visit a financial planner or hear TV and radio experts give advice, you have probably been told that term life insurance is cheaper than whole life insurance. While term is cheaper, it is important to compare the pros and cons of both whole life and term life before making a decision.
We offer term and whole life insurance quotes online. Simply enter your local ZIP code to compare rates and plans. If you need additional assistance, we have experienced life insurance agents who will be happy to consult with you on the phone.
Advantages of Whole Life Insurance
When you purchase straight term, you only purchase insurance that lasts for a certain length of time. Your contract may last for decades, but it is basically worthless when the contract ends. You might be able to renew your coverage, but you will get charged more because you are older, and your expired coverage has no cash value.
This leads us to the advantages of whole life insurance:
- Level premiums: When you buy whole life insurance, you pay the same rate every month and every year you keep your coverage.
- Lifetime coverage: Whole life never expires, and it provides you with life insurance as long as you keep it in force by paying the premiums.
- Cash value: Over time, your whole life insurance policy will grow a cash value that you can use as an asset. You can borrow against or cash in your policy.
- Possibility of senior life settlements: Senior citizens may be able to sell their coverage for a price that is some percentage of the death benefit, and this is usually much greater than the cash value.
How Does Whole Life Insurance Cash Value Work?
Policies differ, so it is impossible to create an example that represents every insurance company. However, whole life insurance premiums include payment for your actual life insurance and a cash account. Also, insurers pay a return on this account, and you might compare it to earning interest in a bank account. Typically, returns on whole life insurance cash values are greater than returns that can be found in banks.
The amount of money that gets allocated to your cash value will vary over time, and so does the amount needed to compensate the life insurance company for covering you. Still, your premiums stay level.
Cash Value Whole Life Insurance Example
Consider a very simplified example of the way that cash value life insurance works. Let’s say you take out a $50,000 whole life insurance policy and pay $35 a month. If an average of $5 a month of this gets allocated towards your cash value with a policy that pays a 5 percent return, you might have have $2,000 in your cash account after twenty years, plus you will still have life insurance as long as you paid your premiums and kept your policy in force.
Senior Life Settlements
If you also happened to turn 65, you might qualify for a senior life settlement if you decide that you don’t need to keep your policy any longer. You can find investors who will purchase your coverage for a percentage of the face value, perhaps half of the $50,000 face value, and that is a lot more money than you can get if you were to simply surrender your coverage for its cash value. These investors do not buy term.
Is Whole Life Insurance Affordable?
Yes, for the same amount of coverage, whole life costs more than term life. However, you can find policies with fairly modest face values, maybe up to $35,000, with rates that are kept affordable for many families and seniors. Sometimes, this is called burial insurance coverage because seniors consider them as a way to help their families pay for funerals and other end-of-life expenses.
We offer whole life insurance quotes online to help our clients find the best deal. Simply enter your ZIP code in the web form to get started. After comparing quotes and plans, you are also welcome to call if you need help or have a question. We can also answer your questions about term life, and we work hard to find all of our clients the right life insurance solution for their unique needs and budgets.