Whole Life Insurance Explained – Should You Get it?
There are plenty of whole life insurance explained articles online. But the truth is, a lot of people still have a hard time grasping the difference between this and term coverage.
Term and whole are the only two kinds of life insurance there are. And most people cannot figure out which to get. Here are some guidelines to help you determine which is right for you.
Generally speaking, it is smart to get term life coverage if you are only going to be keeping it a short period of time. For instance, if your kids are 17-18 and off to college, they will only need coverage for another five years or so. This is because soon they will be working full time and supporting themselves. In this case term would be better.
Why? This is because the rates are much cheaper initially than with whole. However, the longer the policy goes for, the higher they will get. At some point in time term coverage will become more expensive than whole. This might happen in year fifteen or twenty, but after a certain length of time term will become pricier.
The reason is, as you get older you will be a higher risk to the company of dying. Therefore, they need to charge more to justify the risk. However, with whole coverage they already know they are going to have to pay a death benefit.
This is why they charge more money upfront. However, the rates are fixed, which means you will pay the same premium at 80 years old as you would at 30.
So the bottom line is, which you get just depends on how long you need the coverage for. The age of your kids will often dictate this. Just figure out the max length of time you need the death benefits for. That will help you determine which policy makes the most sense. Hopefully this whole life insurance definition and explanation article has given you the understanding needed to make an informed decision.
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