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Life and Health


By April 1, 2009No Comments

By now, most consumers understand the critical importance of Life insurance — especially those who have loved ones depending on their income. Life insurance offers financial protection for your dependents should anything happen to you. Without the right coverage, your family might struggle to pay the bills and make ends meet.

However, there is a common misconception about Life insurance: most people assume that Term Life insurance is much more affordable than Whole Life insurance. Although this might be the case for those who are young and healthy, Term insurance can become exorbitantly expensive for older individuals who might no longer be the picture of health.

Term vs. Whole

As you probably know, Term Life insurance covers you for a specific amount of time — anywhere from one to 30 years. These policies are less expensive because they are designed solely for protection. Many people choose Term insurance because they figure the need for Life insurance will decrease as they get older. Term insurance is also a useful option for those who want to protect their children until they are able to support themselves.

On the other hand, Whole Life insurance is permanent — it offers protection for your entire life. This insurance is ideal for individuals who still have someone depending on their income, whether it’s a spouse, grandchild or a special needs son or daughter. It’s also a good option for individuals who want to ensure there’s enough money to pay off their debts or provide a tax-advantaged inheritance for their heirs after they die.

Making the switch

Let’s say you fall into that second category — you think you might have a need for Life insurance protection for the rest of your life. However, your Term policy is about to expire. What should you do?

You might consider renewing your current Term policy. However, your premiums will most likely skyrocket now that you’re older. Alternatively, you could convert your Term policy to Whole Life. This will ensure that you are covered for the rest of your lifetime — which means your dependents will be protected when you die, whether that happens one or 20 years from now.

Whole-some benefits

One advantage to Whole Life insurance is that the premiums generally remain constant over one’s lifetime.

Another benefit to Whole Life is that you can borrow from the accumulated cash value of your policy. However, it’s important to realize that like any loan, interest will accrue on the money you borrow from your policy. If you do not pay back the loan during your lifetime, this amount will be deducted from the death benefit before it’s paid out to your heirs.

The loan feature is particularly beneficial to older policyholders who have built up a significant cash value. After all, as we grow older, we often run into some financial “surprises” — from medical emergencies to dwindling retirement income. The cash value from a Whole Life policy could help you deal with these unexpected events. For example, you could borrow from your Whole Life policy’s cash value to supplement your income, pay off your mortgage or fund long-term care expenses. You could even use the money to help pay for a grandchild’s college education.

Are you a good candidate?

As with any type of insurance, whether or not you qualify for Whole Life and the price you’ll pay depends on your age, health and the specific type and amount of insurance you plan to purchase. Meet with our financial professionals to determine whether or not Whole Life insurance is right for you. An expert can assess your unique situation and find the best policy to meet your needs.