Should I Get Whole or Term Life Insurance?
Depending on your life circumstances one type of life insurance could provide more benefits
Purchasing a life insurance policy is an essential step for everyone. If you think you are currently too young to take out a life insurance policy, you may actually be in the best possible situation to get coverage. You don’t necessarily have to wait until you have dependents to take out a life insurance policy. The problem for a lot of people—especially people in their 20s and 30s—is that they aren’t sure where to start or which policy is the best for them.
If you’re finding yourself confused by the different types of coverage like whole life and term life insurance, you aren’t alone. In fact, you are likely a member of the vast majority of people searching for insurance coverage for the very first time. In this article, we will discuss who should be searching for term life coverage versus whole life coverage and the reasons why. If you are having trouble making sense of different insurance jargon, keep reading to get a better idea of which type of plan is best for your needs.
Who Needs Life Insurance?
Life insurance plays a bigger role in your family’s financial future than you may expect
If you are a young adult, there is a good chance you need life insurance.
Anyone who has someone dependent on their income or has any outstanding debts should look into purchasing a life insurance policy. If you have a dependent—usually a child or an older parent—then you need to make sure they are protected in the event of the unthinkable. Married couples should also look into getting life insurance. In the event of your death, your spouse will likely rely on your policy during their grieving period and for funeral expenses. If you meet any of these criteria, you should seriously consider taking out a life insurance policy.
- You have outstanding college debt
- You have recently gotten married
- You have an ageing parent that requires medical care or lives in a care facility
- You are expecting a child or have recently become a new parent
- You are in your 20s or 30s and are looking to get the best rate possible
If these circumstances apply to you, keep reading to find out whether you should be exploring whole life insurance or term life insurance quotes.
Who Needs Term Life Insurance?
Now that we’ve determined who needs life insurance, let’s find out who should be searching for term life insurance quotes
If you’re looking for insurance on a budget, term life is the way to go.
Term life insurance is a type of life insurance that covers the policyholder for a set amount of time. Usually, a term life insurance policy will last anywhere from 10 years at minimum to 40 years at maximum. Once the term expires, your policy ends as well.
While this may give some prospective policyholders, often term life insurance policies are designed to provide coverage for only as long as you need. For example, if you are a new parent and want to maintain coverage while your child is a dependent, you designate that the term does not expire until your children are fully grown and out of the house. A good term length to cover raising children is usually around 30 years. We should also mention that term life insurance is the cheaper option of the two we’ll be exploring. Often, people who are young, healthy, and non-smokers can secure policies for around $25 to $35 per month for a $500,000 policy. If you meet any of the following criteria, we recommend you start looking for term life insurance:
- You are searching for coverage for the time it takes to raise children
- You are interested in the most cost-effective life insurance option
- You don’t anticipate needing life insurance after your term has expired
- You are looking for a simplified life insurance plan
If these apply to you, then it is probably a good idea to start your research by looking for term life insurance quotes. However, if you don’t feel like any of these apply to you, you may want to consider whole life insurance instead.
Who Needs Whole Life Insurance?
Whole life insurance never expires and accumulates cash value over time
Whole life insurance never expires.
Whole life insurance keeps your loved ones covered just like with term life insurance—except for the major difference that whole life insurance never expires. You may also see whole life insurance referred to as permanent life insurance in some cases. Since this type of insurance never expires, it means that the insurance company is guaranteeing your coverage payout. Because of this, the insurance company will charge more for coverage. Companies charge less for term life insurance because there is always the chance that you outlive your policy and they don’t need to pay your coverage amount.
Whole life insurance also accumulates a cash value over time, which some find to be an enticing addition to their life insurance coverage. The cash value can be used during your lifetime to cover medical costs or the costs of continued care before your passing. Since medical bills can become extremely high—especially as you age—this cash value comes in handy for many policyholders. If you meet the following criteria, you are probably a good candidate for whole life insurance coverage
- You want an insurance plan that will accumulate a cash value
- You are okay with paying a higher monthly premium for your policy
- You want life insurance that never expires
- You want your payout to be used for funeral costs and other end-of-life services
While whole life insurance isn’t for everyone, there are people who prefer having whole life insurance over term life insurance. If you have a monthly budget, whole life insurance could be the right choice for you to protect your loved ones in the future.
Who Needs to Undergo a Medical Exam?
No-exam life insurance is relevant for both whole and term life policies
No-medical exam insurance is for special circumstances.
Once you’ve decided on the type of policy you are looking for, the next thing to determine is whether or not you should undergo a medical exam. If you are young and healthy, it is definitely recommended that you undergo a medical exam to get insured. Once your medical exam is clear and your information is forwarded from your doctor, you’ll likely be presented with a low monthly premium. The ultimate cost of your monthly premium may be higher if chronic health conditions are discovered or if you use tobacco products.
On the other hand, you can also apply for an insurance policy with no medical exam. Though this is an easier process to get approved, your policy will likely be a lot more expensive. When an insurance company has all of your relevant health information, they can accurately assess how risky you are of an investment. If the insurance company is not provided access to your health information, they are unable to accurately assess the risk of taking you on as a policyholder. Because of this, they will charge you more for the same amount of coverage had you undergone a medical exam.
Due to the cost difference, it is recommended that you undergo a medical exam unless you meet these criteria:
- You have been denied coverage due to a health condition
- You have a job that is considered a risk
- You aren’t willing to undergo a medical exam
- You want to get life insurance as quickly as possible
While these are all valid reasons for getting coverage without a medical exam, keep in mind that the monthly cost of your policy could get expensive.
We hope that you found this article helpful as you begin searching for life insurance. We know that finding life insurance can be confusing at first—but remember not to get overwhelmed. For most people, the best time to get life insurance is right now. When you’re young and healthy, you can get the best rate possible. If you put off getting life insurance and wait until you’re older, the insurance company will deem you a higher risk and you’ll be paying more for the same amount of coverage. Whether you choose term life insurance or whole life insurance, the important part is you are planning for your family’s future.