Making the decision to purchase life insurance is one of the best decisions you can make for your family’s future. The fact is that death can happen when we least expect it. While the loss of a loved one will certainly be a difficult time, the process of mourning and grieving does not have to be enhanced by the stress of financial worry. Life insurance can provide your family with the financial means necessary to continue on even when you are no longer able to provide for them financially. After making the decision to purchase a life insurance policy, your next task will be to determine what type of insurance you should buy and how much is necessary.

Whole Life Insurance Vs Term Life Insurance

There are essentially two main types of life insurance policies that you can buy. A term life insurance policy can typically be purchased with a 10, 20 or 30 year term. The policy will provide the named beneficiary on your policy with death benefits during the length of the term. When the term expires, death benefits will simply cease. With a whole life insurance policy, or with a variation of a whole life policy known as a universal life insurance policy, the death benefits can extend throughout your life.

The Benefits and Drawbacks of Whole Life Insurance

There are several major benefits associated with whole life insurance. For one, as mentioned above, the benefits of a whole life insurance policy may continue until you pass away. Another benefit is that these policies generally accumulate cash value over time. A portion of your premium will be applied to the accumulation of cash value, and because of this, a whole life insurance policy generally is considered a financial asset. You may be able to cash the policy out in the future if you don’t wish to continue to enjoy death benefits from your policy. You may also consider borrowing against the cash value, and these loans are generally low interest rate loans. While these benefits are significant, the one major drawback associated with them is the high cost of whole life insurance in comparison with term life insurance policies.

How Whole Life Insurance Is Used

All life insurance policies will provide beneficiaries with death benefits. Because term life insurance is more affordable than whole life insurance, those who purchase whole life insurance generally do so with a specific purpose or goal in mind. For example, some want to enjoy having coverage with death benefits immediately. However, later in life, death benefits from coverage may not be as important to you. For example, once the kids are grown, your debts have been paid off and your retirement accounts have been funded, death benefits may simply not be needed for financial sustenance. Benefits for coverage then may be used to provide loved ones with a legacy. If your legacy to your heirs includes substantial assets in your estate, many people will leave the proceeds to their beneficiary for the purpose of paying estate tax. Life insurance for estate taxes can be set up to not become part of the estate by naming someone other than the insured as the owner. to Other people may purchase a whole life insurance policy with the intention of cashing it out or borrowing against it later. The funds commonly are used to make real estate investments, to pay for the kids’ college education, to fund retirement plans and more.

Using Whole Life Insurance Strategically

Whole life insurance is more expensive to purchase than term life insurance, but whole life does offer significant benefits that you may want to take advantage of. Many people will have different needs for coverage over the course of a lifetime. For instance, you may need a greater amount of coverage today while you are raising a family and carrying debts than you will need 10 or 20 years from now. With this in mind, you may consider buying an affordable term life insurance policy to provide you with death benefits you need for the next decade or two. Then, you may consider buying an additional whole life insurance policy to enjoy the additional benefits it can provide. By covering all of your needs for death benefits with both policies, you can enjoy the benefits of whole life insurance coupled with the more affordable rates associated with whole life coverage.

Making the Most of a Whole Life Insurance Policy

The additional benefits that a whole life insurance policy provides over a term life insurance policy are best taken advantage of when the policy is purchased earlier in life. It can take a significant amount of time for the cash value of a whole life insurance policy to accumulate in value. Further the rates of a whole life insurance policy are more affordable when these policies are purchased in your younger years. Therefore, if you have plans to purchase a whole life policy, you should take time to shop for rates today.

Whether your purchase an affordable term policy, a whole life insurance policy or a combination of both policies, you do want your coverage to become effective very quickly. Consider shopping for rates on the coverage you need today.

Mozdex Insurance Advisors have helped thousands of families secure their futures with proper insurance planning since 1997.