Determining whether to purchase a life insurance policy can be complicated, and the issue becomes even more confusing as you consider personal factors (such as family make-up and budget) and the different types of life insurance (whole life and term life.) As you assess your needs, you may wonder whether you need the coverage, which type is best for your situation, and how much insurance to get. Before starting, it’s important to understand the differences between and the pros and cons of both whole and term life insurance.
Whole Life Insurance
A whole life insurance policy provides protection for the rest of your life, as long as you’re still paying the premiums. If the policy is still effective when you die, your beneficiaries will receive a sum. This type of insurance is often chosen as an investment of the cash value. These plans usually consist of a death benefit, premium, cash value, and dividends. Most people consider buying whole life insurance when they want to provide money for funeral expenses, leave an inheritance, or save their family from estate taxes.
The Pros
- Coverage lasts until the age of 100 instead of 80 which is when term insurance expires.
- Your heirs won’t have to pay estate taxes or will have a reduced amount of taxes.
- Your loved ones can receive a tax-free payout at your death.
- As long as you pay premiums, their amount is fixed, and the death benefit is guaranteed.
- The policies build cash value and may be counted as an investment after other options have been maxed out.
The Cons
- The primary purpose of whole life insurance is not as an investment, so your returns are sure to be conservative.
- This type of life insurance tends to be most expensive.
- You may end up paying for coverage you never really need.
- The money in your policy doesn’t really belong to you; if you borrow from the policy, the withdrawal is treated like any other loan.
Term Life Insurance
The purpose of term life insurance is to give your family or beneficiaries a temporary financial resource if you pass away. This type of coverage offers a death benefit but doesn’t carry any cash value. The policies usually span a set amount of time, such as three or thirty years. The premium is affected by the age and health of the policyholder.
The Pros
- Term life insurance is very affordable, sometimes no more than a dollar or two a day.
- The coverage is easy to understand and rarely include an exam plan.
- This type of insurance can be converted to a whole life or universal life plan.
- Many add-ons are available for customized plans.
The Cons
- These Columbus life insurance policies will expire when their terms are up. The annual renewable term is much more expensive, and the cost continues to increase at that point.
- There’s no savings or investment option with this type of policy.
How to Choose
The best way to determine which type of Columbus life insurance is best for you and your loved ones is to talk over the options with an agent. Some customers begin with coverage they can afford and adapt their policies to meet changing needs. Which type of insurance coverage sounds best for your situation?
