Which life insurance is best for me?

Life insurance benefits your loved ones when the inevitable happens. While it can be difficult to think about your own death, choosing the right term or whole life insurance policy can protect your household and allow you to leave a legacy for those you love most.

Term life insurance provides a guaranteed death benefit only if the insured person dies during the term or while the policy is in force. Typically, this ranges from one to 30 years or up to a specific age. Term life insurance tends to be much cheaper than whole life insurance because term policies have no cash value and can expire without paying any benefits.

Whole life insurance is a form of permanent life insurance that covers the person for their lifetime, rather than for a fixed period of time. Whole life insurance pays a guaranteed death benefit and has a cash value component that the policyholder can borrow or withdraw under certain conditions.

As the name suggests, whole life insurance lasts for your lifetime. As long as you continue to pay premiums, this type of lifetime coverage will pay a guaranteed death benefit when you die. Here are some key features of whole life insurance:

  • Premiums are guaranteed. When you buy this type of life insurance, the premium is locked in. It will not increase during the life of the policyholder. Generally, the higher the death benefit, the higher your premium will be.
  • Cash savings increase over time. You may be able to borrow against equity or withdraw some of the money. If you die before the full repayment of the loan, the death benefit will however be reduced by the amount still due. You may also be able to surrender the policy and receive the cash value.
  • A medical examination is often mandatory. Depending on the type of policy, you may need to undergo a physical examination before your application is approved to determine your premiums and insurance risk. Some companies offer no-exam whole life insurance policies that have a guaranteed payout and can accumulate cash value, but these policies tend to have much lower levels of coverage, typically $25,000 or less.

Term life insurance lasts for a specific term or period of time and pays the beneficiary a guaranteed death benefit only if the policyholder dies during the term. However, some term life insurance policies offer a premium refund feature, which returns some or all of the premiums if the insured does not die before the term expires. Term life insurance policies with refund of premiums are generally more expensive.

Other features of term life include:

  • Premiums may change. The most common type of policy, called a level term, has fixed premium rates, but there are other types of policies where premiums increase or decrease over time with corresponding changes in the amount of the death benefit.
  • Some policies can be converted to whole life insurance. Some insurers allow conversion at any time during the term of the contract, while others impose time or age limits. You may also be able to convert the policy at the end of the term. If you want the ability to convert your coverage, look for a policy that contains a conversion clause or offers the option of adding a temporary conversion rider.
  • Terms are flexible. Most insurers offer policy terms ranging from one year to 30 years or more, although some companies also offer terms that last until a certain age, such as 65. In general, the shorter the term and the younger you are, the lower your premium will be. be.
  • A medical examination may not be required. While many insurers still require an exam for a basic term life insurance policy, several insurers are now offering no-exam term life insurance.

In general, a term life insurance policy is much cheaper than a whole life insurance policy. For example, a hypothetical 40-year-old woman who is a non-smoker could pay as little as $52 per month for a $1 million 20-year term life insurance policy. If this same woman wanted a whole life insurance policy, she would pay $1,000 or more per month, according to our data.

Term coverage is cheaper because it only pays if the insured person dies during the term of the policy. Whole life insurance costs more because it pays a survivor benefit regardless of when the individual passes away and also builds cash value over time.

Life insurance takes many forms. Depending on your needs and financial goals, one of these types of permanent life insurance may be worth considering:

  • Universal. A universal life insurance policy offers a little more flexibility than whole life insurance. For example, you may be able to increase the death benefit or change your premium payments. Typically, the policy pays out based on either the market index or the insurer’s investment portfolio. However, the value could potentially go down if the rate goes down.
  • Indexed. This insurance coverage has a cash value as well as a death benefit. The cash value account earns interest based on a stock market index chosen by your insurer. There is no fixed rate, but insurers generally pay a minimum rate. You can usually borrow or withdraw from this policy and adjust the payment and premium payment.
  • Variable. In addition to a death benefit, variable life insurance includes a savings account that can be invested in stocks, bonds or money market mutual funds. Of course, there are risks involved: if your investments don’t perform well, your cash value and death benefit could drop. Some policies guarantee that your payment will not exceed a stated minimum.
  • Final expense. Also known as funeral insurance, this is a type of whole life insurance policy with a fairly low payout – usually $5,000 to $25,000 – that is purchased specifically to pay for the expenses of end of life such as funerals and burial or cremation. The payout is low, but so are the bonuses: they may be only a few dollars a week.

When shopping for insurance, you’ll likely see various types of policies, including variations of those listed above, including variable universal life and indexed whole life. For more information, see our guide to life insurance quotes.

Do I need both term life and whole life policies?

There’s nothing stopping you from buying both types of life insurance policies to protect yourself or your loved ones. It depends on your needs and your budget. For example, you might purchase a term life insurance policy in your early 20s, when your lifestyle is quite modest: spouse or partner but no children, renter rather than paying mortgage, and little savings. or other assets. In this scenario, replacing the loss of income resulting from your death should be the priority, something a term life insurance policy can do for relatively little monthly cost.

As you age and gain savings and other financial assets, you may want to add a whole life insurance policy, either to supplement a term policy or to replace it when it expires. Since whole life insurance accumulates cash value, it can provide an additional layer of financial support. You can use the funds for an emergency while you live or your beneficiaries can use the death benefit to meet financial obligations such as college tuition or to support a disabled child or spouse.

The best way to determine the type of life insurance policy or policies to buy is to speak with an independent agent or financial planner, who can help you assess your needs.

Can you convert term insurance to whole life?

If you have what is called a convertible term life insurance policy, you should be able to convert it to a whole life policy. Some companies impose a time limit or age limit for doing so, while others will allow you to convert your policy at any time during the term. Depending on the insurer, a medical examination may not be required. But keep in mind that your new premium will likely be much higher because whole life insurance is more expensive than term insurance.

Not all insurers offer convertible term life insurance. Check your policy or contact your agent for details.

Can you convert whole life insurance to term life insurance?

A provision called the extended term insurance option allows you to surrender your policy and use the available cash value to purchase an equal amount of term life insurance. This option may be worth considering if you can no longer pay your whole life insurance premiums. It’s important to remember that the new term life insurance policy may not last the rest of your life.

Does whole life insurance cover long term care?

Depending on the company, it may be possible to purchase a whole life insurance policy with an optional add-on called a long-term care rider. This additional coverage can be used for expenses not covered by health insurance – namely, assistance with daily chores such as bathing, eating or dressing – while caring for a home. retirement, long-term care facility or home. health assistant.

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For more information on life insurance, see the following guides:

360 Associate Reviews

For more information on other types of insurance, see the following guides:

Why You Can Trust Us: 25 Life Insurance Companies Studied

At US News & World Report, we rank the best hospitals, the best colleges, and the best cars to guide readers through some of life’s most complicated decisions. Our 360 Reviews team uses this same unbiased approach to evaluate the products you use every day. To build our ratings, we researched over 25 life insurance companies and agencies and analyzed 14 third-party review sources. Our 360 Reviews team does not take samples, giveaways, or loans of products or services we review. All product samples provided for review are given after review. Additionally, we maintain a separate sales team that has no influence over our methodology or recommendations.

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