Do You Think I Need Whole Life or Term?
One of the most common questions I get asked as a Life Insurance agent is “Do you think I need Whole Life or Term?”
Just to be clear, that is not a question I can answer with no information. I must understand the prospect I am talking to: meaning their financial goals, where they are with finances currently, and where they want to be. It is very important I know my client before recommending a plan.
What I can do Is break down the information to enable you to understand the importance of both policies. To break it down simply - Whole Life is a permanent life insurance plan that lasts your entire life and builds cash value, while Term is a Life Insurance that is temporary and lasts for a period of time. There are many variations for both Whole Life and Term Insurance. Therefore, make sure to ask your agent about the type that is best for you. The length of a Term Insurance policy is the number of years of your term policy. In most cases anywhere from 1 to 30 years is the length of time a term will last. If you are above age 65, most companies will not offer the 30-year term option anymore and some will not offer term at all.
So now back to the question of which one is best. To answer, I would say both if you plan on living past 30 years which we all hope for. Since there is no way for you to know what day will be your last, I say plan to live long! If you do not have any temporary liabilities like kids, mortgages, tax debt, etc, then going for permanent coverage in my opinion is more beneficial. My reason for this is you can be covered and build an asset at the same time. You can use the living benefits of the cash value. This essentially creates your "bank" that you are allowed to borrow from as you please as long as there is cash available. You can pay the interest to the policy to avoid additional loans and even pay back what you borrowed to have access in the future to borrow the money again. Whole Life Insurance can allow you to create infinite banking for yourself. Just realize that the size of your "bank" depends on the size policy you have. The larger policies will create access to more cash value.
Regarding Term Insurance, there are many temporary liabilities a person may have to cover with a term policy. Term is the most affordable option out of the 3 types of Life Insurance (Whole Life, Term Insurance, and Universal Life). This option will allow you to have a larger death benefit for your money when you compare the face amount of Whole Life using the same budget. For example, I have a 30yr old purchasing 1mill in Term when health insurance could cost $30 a month. With that same $30, the 30yr old will be able to get about 25k in Whole Life. Therefore if they're on a budget and need to cover their family, then mixing both the Term and Whole Life will allow them to have more coverage for their money. This strategy may work for you during the years you need to cover your children while they are young or any temporary liabilities that you may have. Meanwhile, you can secure some permanent insurance for example Whole Life, so when your term expires, you still have coverage from your Whole Life which has built some cash value over the years. I like to call it the best of both worlds for the client that fits this situation.
Please consult with a licensed Life Insurance Agent to consult on what is best for your situation. My link is below to schedule an appointment if you are looking for an agent.
