term life insurance vs whole life

What Life Insurance Is Best?

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Forty-six percent of people living in the U.S. do not have life insurance. And one of the top reasons they do not have it is not knowing which insurance to get. If you are comparing life insurance companies and policies, how do you know which life insurance is best for your needs?

Which Life Insurance Company Is Best?

Young Asian mom and duagher looking at a computer

The best life insurance companies offer resources to help you understand your policy and when you need to adjust it. A stable life insurance company has a long, reliable history of providing policies and paying out death benefits.

Although many life insurance companies use names that convey strength, the Insurance Information Institute recommends verifying the company’s full name, location, and affiliation with other companies.

Also, research to find these facts about a company:

  • Identity
  • Reputation
  • Ethics
  • Financial status
  • Product range

What is the quality of customer service?

Choose an insurance company that makes it easy to learn about the types of life insurance policies available and get help understanding them.

Look for these services:

  • A comprehensive selection of policies
  • Online articles and educational resources
  • Online insurance calculators
  • Accessible, knowledgeable, personalized customer service

What Is the Best Life Insurance Policy for You?

The best life insurance satisfies your reasons for purchasing a policy. Find a policy that fits your budget and offers enough coverage to care for your surviving dependents. The National Association of Insurance Commissioners advises that you select a policy that provides enough coverage based on your age and financial responsibilities.

Look for a plan that offers enough coverage to satisfy your potential needs:

  • Replace up to ten times your income
  • Pay off debt
  • Care for aging parents or disabled dependents
  • Pay for children’s education

Term or permanent life insurance?

Term life insurance is in effect for a limited period, or term. Terms are set in increments of five (5, 10, 15 years, etc.) and can last up to 30 years. A whole life insurance policy lasts your entire life and builds cash value over time.

Before you purchase an insurance policy, ensure it fits your needs based on these factors:

  • Your age
  • The policy type and features
  • The amount of insurance you are purchasing
  • Cost of premiums

Many insurance policies offer riders—add-ons to enhance your policy. But riders will increase your premiums. Please read the post, Term Life vs. Whole Life Insurance – How to Decide for a comparison of term and whole life insurance.

In Raleigh, John Hunt of Hunt Insurance offers personalized assistance to help you identify an insurance policy that fits your needs and budget. Contact Hunt Insurance by phone or e-mail to request a consultation and a customized quote.

Term Life vs. Whole Life Insurance – How to Decide

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Trying to decide whether to purchase term life or whole life insurance? Although term life insurance is the most common selection, which one is right for you? After you understand the difference, it will be easier to select a policy.

What Is Term Life Insurance?

Term life insurance provides coverage for a specific period or term. Coverage periods are usually offered in increments of five years—usually between ten and 30 years. When the term ends, you can renew the policy, convert to a permanent policy, or let the policy expire.

  • Premiums – Your age, health history, lifestyle, the term length, and the amount of coverage you want will affect your premiums. Term life insurance monthly premiums are less expensive than permanent life insurance premiums.
  • Payout – Your beneficiary is guaranteed a payout if you die during the term of your policy.
  • Cash value – Unlike permanent life insurance, term life doesn’t build cash value.

What term length should you choose?

Consider a policy that provides coverage until your dependent children, if any, have completed college and live on their own. At the end of the term, if you have fewer dependents, you can lower your coverage amount and save money on premiums. Or you can select a term that lasts until you retire if you’re leaving your retirement income to a beneficiary and can reduce your life insurance coverage.

What Is Whole Life Insurance?

Whole life insurance is a type of permanent life insurance. It provides coverage for your entire—or whole—life. Your beneficiary will receive a payout when you die. And the policy includes a use-it-or-lose-it cash savings account that accumulates over the years as you pay premiums.

  • Premiums – Your age, health history, lifestyle, and insurance coverage amount will affect your premiums. Whole life insurance monthly premiums are higher than term life premiums—five to fifteen times higher.
  • Payout – If your premium payments are current, your beneficiary is guaranteed to receive a payout.
  • Cash value – Whole life insurance builds cash value over time. It’s a tax-deferred “living benefit” for you. If you die, your beneficiary will receive the death benefit, but the cash value will return to the insurance company. 

It takes time to weigh the facts and decide which policy is best for you. Our post, Whole Life Insurance Policy – 5 Questions to Ask First, gives details on what you should consider before selecting whole life insurance.

How Much Life Insurance Do You Need?

Think about how much life insurance is needed to replace your income and care for your beneficiary and dependents if you die.

  • Some experts recommend that you purchase life insurance that equals ten to 12 times your annual income.
  • Other experts advise that you multiply your annual income times the number of years left until you retire.
  • If you have a stay-at-home spouse, consider the cost of caring for your children or home if your loved one predeceases you. Get life insurance for your spouse, too.
Infograph to highlight the differences between term and whole life insurance; from Hunt Insurance of Raleigh

Term Life vs. Whole Life – Five Questions to Ask Yourself

Take another look at the differences between term life and whole life insurance. Ask yourself the questions below. Confirm your reasoning with a licensed insurance agent who can help you compare your options, costs, and the long-term effects of the type of insurance you choose.

  1. How many family members will depend on my income for my entire life?
  2. Do I have debt that limits what I can afford to pay for premiums each month?
  3. What is the value of my assets and estate? Am I subject to an estate tax that I can pay with the tax-deferred cash value of a whole life insurance policy?
  4. Will I have enough savings to self-insure at the end of my term life policy, or will I need to renew or convert it?
  5. Do I have valid reasons to pay higher premiums for whole life insurance that builds cash value? Or can I invest elsewhere and get a higher return?

Start the conversation with Hunt Insurance of Raleigh-Durham, NC. Contact us today.

Is Term Life Insurance a Waste of Money? 4 Ways to Tell If It’s Right for You

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Outdoor photo of a young blonde woman with her young son on her back; for information on Raleigh-Durham term life insurance from John Hunt Insurance.

Many people wonder if term life insurance is a waste of money because it’s active for a limited amount of time—or term. When the policy ends, if you still want coverage, you’ll need another one. So, what’s the point in making the purchase?

Why Choose Term Life Insurance?

Term life insurance isn’t a waste of money. Although it doesn’t accrue cash value, it’s an affordable option when you’re on a budget, need payments that generally stay the same, or need coverage for a limited period.

1. Consider the facts

  • According to LIMRA’s 2019 Insurance Barometer Report, 43 percent of Americans don’t have life insurance.
  • Term insurance is the most common type of insurance that consumers purchase. During the 2019 study period for the LIMRA report, 71 percent of purchasers chose term insurance.
  • A July 2019 mortality trends report published on the Center for Disease Control website indicates that between 2012 and 2017, U.S. death rates increased for all adults between ages 25-44 in all ethnicity and race groups.

2. It’s affordable

  • Term life insurance costs less than whole life insurance, which is active throughout your lifetime.
  • You can purchase life insurance for the years you need it most.
  • Some people purchase term life insurance policies in succession to match the demands of their budget vs. a single permanent policy.

3. Fixed payments

Level term life insurance policies have set payments that don’t increase during the term. When the policy ends, if you decide to purchase a new one, your age, declining health, or the length of the policy will affect the cost.

4. Weigh the financial advantages

If you don’t have adequate insurance, a term life insurance policy isn’t a waste of money. Consider some of the ways that the funds will help your beneficiary:

  • Business purposes
  • Charitable gift
  • Estate taxes/liquidity
  • Pay for burial expenses
  • Pay for college education
  • Pay off mortgage
  • Replace a policy
  • Supplement existing group coverage

What Are the Types of Term Life Insurance?

Three common types of term life insurance include level, renewable, and convertible.

Level

Level term life insurance is available from 10 to 30 years, in five-year increments:

  • 10
  • 15
  • 20
  • 25
  • 30

Renewable

Features of renewable term life insurance include:

  • Terms are offered in increments of one or five years
  • No need for a medical examination or evidence of the state of your health
  • Age-based premiums

Convertible

What should you know about convertible term life insurance?

  • Offers the ability to convert to a permanent policy
  • Conversion is available for a limited time
  • Premiums will increase if you convert to a permanent policy

Who Purchases Term Life Insurance?

There are plenty of people who don’t think that term life insurance is a waste of money. It appeals to people with varying backgrounds and circumstances, including:

  • Retirees who want coverage until retirement income is available
  • People who desire supplemental coverage to pay off a mortgage, provide college funds for surviving children, or provide additional income for a spouse
  • Young people who want to take advantage of lower premiums based on their age and good health
  • Anyone on a budget with limited funds for purchasing insurance

How Much Does Term Life Insurance Cost?

Several factors influence the cost of life insurance, including:

  • The amount of coverage required to care for the needs of your survivors
  • Your age and gender
  • Your health history
  • Your family health history
  • Your occupation
  • Your hobbies
  • Whether or not you smoke or use recreational drugs

You can ask for a free quote from multiple sources to compare your options and costs.

Contact Hunt Insurance of Raleigh-Durham, NC for a hassle-free quote.

Read about different types of term life insurance on our blog post, What Happens to Term Life Insurance at the End of the Term?