Benefits of whole vs. term life
By Capias II
Whole life has many living benefits that you can not duplicate with any other life insurance product. Whole or permanent life insurance is the best vehicle available to the person who is not in a position to afford massive real estate or other investment vehicles, but would like to leave a decent legacy to their heirs.
In the United States, life insurance benefits do not go through probate, are not taxed and your heirs have access to their inheritance usually within a few days or weeks not months or years. In addition, whole life builds a cash value that you can access in emergencies, for home improvements, or use it for extra tax free income in retirement by withdrawing a set amount monthly or annually just like a pension.
Whole life is one of the safer ways to build retirement income if you start your policy at a young enough age or infuse it with extra cash along the way, being careful not to exceed the seven pay limit. The illustration with the whole life policy should indicate what that amount is. If it does not, ask for it!
The best benefit of whole life is your premium payment never goes up no matter how old you get. While it costs more than term life initially, over time regular term insurance premiums become cost prohibitive and you have nothing to show for them, while whole life premiums stay the same for life. Hence the term whole life.
Term insurance is best for short term needs like a mortgage. Mortgage protection life insurance is a term life insurance policy that has special riders that provide for your mortgage payment to be protected if you become disabled or unemployed. Because term insurance gets more expensive as you age, most policies lapse due to non-payment. Term insurance is pure profit to the carrier as the majority of term policies are never paid out. Most are canceled due to the increasing premium costs long before the policy owner dies.
Term life has it’s uses for protecting your home, short term debt, salary protection for a surviving spouse until your youngest child reaches age 18-21 or other obligations to save your family from financial ruin.