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 may 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. While this may be the case for young and healthy people, term insurance can become expensive for older individuals who may no longer be the picture of health.
Term vs. Whole
As you probably know, term life insurance covers you for a specific 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 valuable option for those who want to protect their children until they can support themselves.
On the other hand, whole life insurance is permanent—it protects your entire life. This insurance is ideal for individuals who still have someone, whether a spouse, grandchild or special needs son or daughter, depending on their income. It’s also a good option for individuals who want to earn enough money to pay off their debts or provide tax-advantaged inheritance for their heirs after they die.
Making the switch
You fall into that second category—you may need life insurance protection for the rest of your life. However, your term policy is about to expire. What should you do?
You may 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, and 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.
One advantage to whole life insurance is that the premiums generally remain constant over one’s lifetime.
Another benefit to your life is that you can borrow from the accumulated cash value of your policy. However, it’s essential to realize that, like any loan, interest will accrue on the money you borrow from your policy. If you do not repay the loan during your lifetime, it will be deducted from the death benefit before it’s paid out to your heirs.
The loan feature benefits older policyholders who have built up a significant cash value. After all, as we grow older, we often encounter 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 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 insurance, whether or not you qualify for your 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 Brian Gruss to determine whether or not whole life insurance is right for you. He can assess your situation and find the best policy to meet your needs.