At some point in your life, you may be faced with the question of which type of life insurance – whole or term – is best for you.
Asking this question means that you are planning ahead, which is great! We’ve put together this guide to help explain the different benefits and costs associated with both types of policies in order to make your decision easier.
Whole Life Insurance vs Term Life Insurance
Term Life Insurance
The first thing to understand about whole versus term coverage is that term insurance only covers a certain period of time because it expires after the period ends. The length of the period depends on what you choose. What this means is that if something happens to you within that time period, your beneficiaries are covered but if it happens after, they may not be protected. If you don’t want to take any risks, term insurance can be an excellent option for you.
Whole Life Insurance
Whole life insurance, on the other hand, covers you for your lifetime and continues to do so after death. It is more expensive than the term because the premiums last for a long time so it is a more comprehensive policy. This is why it’s likely to be more expensive and it is a personal decision as to whether the higher initial cost is worth the additional peace of mind that comes from knowing that your family will always be protected.
Another important aspect of whole life insurance is its flexibility. The money you pay in premiums can be invested and may build up into a sizable amount over time. You can also choose to take less money out of the policy for expenses like medical or other bills and keep it in a special account. If you take too much out, however, your beneficiaries will not receive any more death benefits.
With term insurance, after the policy is paid off the remaining amount expires and cannot be invested. It is simply there as a lump sum death benefit no matter how long you live, so any children or grandchildren are also reliant on this money if they need to pay for things like college.
Can you cash out a whole life insurance policy?
One of the most common mistakes people make with an insurance policy is cashing it out before they’ve reached retirement age. In fact, you cannot cash out a whole life insurance policy before age 50 or before age 55 if you’ve had the policy for at least 30 years. Whole life policies are designed to cover your financial needs from cradle to grave – and cash-outs don’t work for this kind of long-term planning.
How long after death do you have to collect life insurance?
If you want to collect insurance benefits after your loved one dies, the answer is actually less than you might think. You can make a claim on an adult’s life insurance policy within two years of the date of death-though not before. Now, keep in mind that if your loved one had life insurance with multiple policyholders, the claims period starts over for all of them when they die.
Given these limitations, it’s wise to start planning now for what will happen if someone in your family dies unexpectedly.
Can a beneficiary ask to see bank statements?
If you are trying to decide whether or not a beneficiary has the right to see bank statements of the deceased, there are several factors to consider.
There are many reasons why one might ask for this information, but most people simply wish to know how much money is available in the estate. A trial is often necessary if agreement cannot be reached about whether or not a beneficiary has this right.
How are life insurance death benefits paid out?
There are two ways that life insurance death benefits can be paid out, and each process has different guidelines.
The first type of payout is through the beneficiary’s policy. This will only happen if you have named one specific person to receive your death benefits. The second type is through the “lost wages” provision in your policy, which says that the benefit will be paid to any dependents who cannot work for a year or longer due to illness or injury after your death.
We hope you enjoyed our blog post on whole life and term life insurance. By the end of this blog, you should feel confident that you know what kind of life insurance is best for you. That being said, we hope you also take the time to visit the website provided in the blog post to learn more about the differences between the two types.
If you have any questions, please don’t hesitate to contact us. Thank you for reading, we would love to hear from you!