Frequently debated online and at social gatherings, the rise of term life insurance as the industry standard is an interesting tale. Why should you consider whole life insurance vs. term life insurance? Below, find an abbreviated list of 15 reasons why level term life insurance is quickly becoming the best option for you and your family.
1. Cost Simply put, the cost of term life insurance is often a tenth of the price, sometimes less. Of course, it does depend on the type of cash value life insurance policy and the type of term life policy. Why should you pay more?
2. Ease You can buy term life insurance on the phone, in person or online and start the process quickly. Fill out a few forms, many of them online, and be done with it in short order. Given the complex accounting methods (my choice of words here) used with whole and universal life, you might need to spend weeks reviewing them just to make an educated decision.
3. Speed If you want to evaluate a whole life insurance policy, you may consider reaching out to dozens of companies and wading through thousands of pages of contracts to make an informed decision. But term life? You realistically can do a good job at it and have your policy fully in force in 30 days. You may even qualify to be ‘temporarily bound’ that same day.
4. Simplicity Term life is so much simpler than whole life insurance it’s almost comical. Because there is no cash value, there really are not as many things to worry about. Term life has often been called pure insurance. With term life, assuming you pay your bills on time, you will be insured for a given set of years. Why is term life so simple? Mainly because it is sold purely as insurance and not with a financial cash value addition.
5. The open market Term life insurance is typically sold in 10-, 20- and 30-year increments in a level fashion. Yes, there are other options and ways to purchase it, but these three time frames and the level method seem to be the industry standard now. Any independent agent worth his salt can produce dozens of quotes with A-rated companies. Why? Because for independent agents, it is an open market. This is not necessarily the situation with captive insurance agents. Independent agents often will work through general agencies (brokerage general agency) that combine 50 or so insurance companies together allowing the client to see all of the options available.
6. Comparable policies Find someone who is impartial that also has the time and understanding to compare 10 different universal life insurance policies and you will likely need to pay them a lot of money. Just go ahead and attempt to compare whole life insurance policies yourself. But term life? It’s pretty simple to compare one company’s product with another. You can even line them up on a spreadsheet to assist you in that decision. Want to focus on A+ rated carriers because of their creditworthiness? Rather focus on the yearly premium? Consider only name brand companies?
7. Newest model Perhaps in the 1950’s, before the advent of 401k’s, IRAs and 529’s, a whole life insurance policy may have had a more prominent role in your finances. But today, the new model often suggested is to buy term life and use the remaining cash to fill up 529’s, Roth IRAs and 401k’s. Why do it this way? I am not a not a financial planner — you should consider asking one — but it would seem a generally better use of your finances.
8. Comparable One level 20-year policy is generally comparable with another. With the exception of the payout exclusions and underwriting criteria (which a good broker can assist you with), it is relatively simple to review four or five options yourself and make an educated decision. Have a special health situation? Make sure you speak with a human and not just a computer.
9. You need it In general, term life insurance is indeed needed by the masses. Most people that have children or other dependents are instant candidates.
10. You want it When is the last time you heard someone say, “I should not have gotten that term life policy?” Perhaps these words have been uttered before, but I have never heard them.
11. Your spouse wants you to have it Simple, affordable term life insurance is recommended by most financial planners. There is a reason for that. It is simple and affordable coverage that you are likely to be able to fund for the period of time that you sign up for it.
12. Your kids need you to have it The most common reason people buy term life insurance is to help financially provide for their children in the event of their untimely death. Procuring term life insurance is one of kindest and most thoughtful things to you can do for your children.
13. A simple, straightforward decision What are the factors that can help you decide? Credit rating, yearly premium and potentially your agent’s recommendation are three of the things that you should consider. With term life, you don’t need to worry about guaranteed vs. non-guaranteed payouts, participating options and paid up additions. Term life is a simple and straightforward decision.
14. The costs to get out Want to quit a whole life policy? Better read the fine print. You may find that the cash value is not what you thought it may have been. Term life? Just stop paying the bill and notify the insurer.
15. Sleep You will sleep more soundly after you are all set up.
Are there situations when I would recommend whole life insurance? Yes, there are couple. But for the vast majority of Americans today, I truly believe that level term life insurance is one of the best financial decisions an individual can make.