Should Seniors Opt for Term or Permanent Life Insurance?
Article by Denise Mancini
Life insurance policy needs are usually different at different stages of an individual’s life. When you’re just starting out as a young, single adult, you may see little use in getting your life insured.As you grow older, so do your responsibilities. You may have dependents who rely on your income to subsist and you need to ensure their financial security in case you’re no longer around to care for them.Then you reach a stage of greater financial stability where your kids have been through college, the house has been paid for, other consumer debts taken care of, and you probably have money put away for retirement.At this time in your life, your need for life insurance could be significantly different and you could do well to revisit your policy. The question you, as a senior, must ask yourself is whether it’s term life or whole life insurance that you need now.Term life insurance, as the name suggests, provides coverage only for a specific period of time. Term life insurance is usually recommended for young families that are starting out and have dependents, mortgages, and other financial commitments, but limited resources.As it’s relatively inexpensive, it allows younger people to buy considerable insurance on their life at very low premiums. The purpose of term life insurance is pure coverage in the event of the insured’s premature death and it has no “investment component”. The only way term life insurance can be cashed out is if the policy holder dies.The biggest benefit of term life insurance is its affordability. However, the premium rates keep rising as you age. Therefore, if seniors were to purchase term life, they will lose out on its cost benefit as the rates offered to them would be considerably higher especially if they are not in the best of health.They would also need significant amount of savings to live a comfortable life post retirement and meet any unexpected medical expenses associated with old age. That’s why whole life insurance policy is recommended for older people.Whole life or permanent life insurance, unlike term life, offers coverage for your entire life as long as the premiums are current. In addition to providing coverage, whole life policy also builds cash value.Because it provides continual protection and has a savings feature, whole life insurance policy is more expensive than term life. Even so, whole life insurance is believed to be a better bet for the retired or nearing retirement folk for several reasons.
Term life insurance provides coverage until the age of 75, where permanent life insurance remains in force for your whole life.You need to have reached a certain financial ability to afford whole life insurance. Older people generally have lesser financial obligations and can afford higher premiums more easily than those who are starting out.You can cash the policy out for the accrued value in case of an unplanned medical emergency or even use it as collateral for loan. In short, whole life insurance acts like an asset that can be used at the time of need.Unlike renewable term life insurance premiums that generally increase with age, the premiums on most whole life insurance policies remain the same over the years.The insured can have the peace of mind that whenever their time comes, which is more of a concern as you get older, there will be guaranteed coverage for their partner.Most whole life insurance policies offer dividends that can be added to the cash value or death benefits.Proceeds from whole life insurance can be used to pay for the funeral and other final expenses when the insured passes on.Seniors can also buy a whole life insurance policy as an estate or legacy for their grandchildren.A smaller whole life insurance policy would generally not require you to go through a health examination, which works well in case of declining health.However, whole life insurance is a long term commitment that one should consider purchasing only if they are confident of keeping up with the payments. Letting your whole life insurance policy lapse because you’re unable to pay the required premiums can spell disaster for your financial plans and should be avoided at this crucial juncture of your life!About AccuQuote:AccuQuote is a leader in providing term life insurance quotes to people across the United States. In 1986 it began operating with a single goal: to make the process of buying term life insurance as easy as possible for its customers. Their experienced professionals consistently deliver the most affordable term insurance rates by comparing thousands of life insurance policies from dozens of top-rated carriers.
What type? Permanent or term life insurance?
Article by Denise
Now that you are ready to purchase life insurance, the choice before you is what type of life insurance would best suit your purpose. Life insurance is not a one-size-fits-all product and each one must assess his or her own personal situation to come up with the right coverage and the number of years you would need that coverage. The two broad categories of insurance open to you are permanent or term insurance. Let’s take a look at each one.Term life insuranceThis is the simplest type of life insurance and is often considered to be insurance at its best. You pay a certain amount of premium against a death benefit amount (coverage) that your family would receive in case you die during the tenure of the term insurance policy. Term insurance is temporary. This means you can purchase a policy for a period of term, say, 5, 10, 15, 20 years or even longer. You pay premiums monthly or annually. Annual payments work out to be cheaper than paying premiums every month. There is no savings element involved. If you should outlive the policy, the money you have paid towards premiums is gone. To avoid this, life insurance companies also offer a type of term insurance called return of premium. At the end of the term period, if you are still alive, all the premiums you have paid will be refunded to you, tax free. There are several types of term life policies, such as level term life. Level term assures that your premiums remain level, or the same, during the entire term period. This avoids any unexpected hikes in premiums during your term period that you had not planned for.Since term life is temporary it is the cheapest insurance you can purchase. For example, a 40-year old male who is in top health, living in California can get term insurance for as little as 0.00.To summarize, here are the main features of a term insurance policy:
Term life is temporary life insurance and can be purchased for a specific term period. After the term period is over, you would need to renew the policy if you still feel you need to be insured.Term insurance is the most affordable.There is no savings element involved.Term life can be renewable – look for renewable options that do not require you to prove your insurability after the term period is over.You can purchase term insurance at a cheap rate right now and convert to a permanent life policy at a later date. You would need to look for a term life policy that offers you this conversion option.Permanent Life InsurancePermanent insurance (also called whole life insurance) offers lifelong protection. It is more expensive than term insurance because, along with insurance coverage, there is a savings component attached to it. For the first ten years, your permanent life policy will not accrue much interest. Much of the interest will be used to pay off administrative fees. You cash value will only kick off after that.Another benefit to owning a permanent life policy is that you can borrow from it anytime you need cash. Interest rates are high, but should you need the money, you are able to take a loan against your whole life policy.To summarize, here are the main features of a permanent life insurance policy:Permanent life offers life insurance protection for your entire life provided you pay your premiums.It is more expensive than term insurance, but offers a cash value component not found in term insurance.You can take out a loan against a permanent life policy.The premiums remain the same throughout your life.Permanent or Term Insurance?Most experts recommend that you purchase a term life policy and invest the difference (between term and permanent) in a separate investment instrument. This is more likely to fetch you more money on interest than a permanent life policy would. Others also suggest that life insurance is not something you need for a life time. Growing families, in particular, who have limited income, prefer term insurance because it is the most affordable and meets their coverage needs most satisfactorily. If you are looking for cheap life insurance from some of the most financially strong life insurance carriers in the industry, request for free insurance quotes online. Comparing multiple term life insurance quotes online is quick and convenient. Some websites also offer professional guidance to help you make an informed decision.About AccuQuote:AccuQuote is a leader in providing term life insurance quotes to people across the United States. In 1986 it began operating with a single goal: to make the process of buying term insurance as easy as possible for its customers. Their experienced professionals consistently deliver the most affordable term insurance rates by comparing thousands of life insurance policies from dozens of top-rated carriers.
Reasons to Convert Term Life Insurance to Permanent Life Insurance
Term life insurance may make sense now, when funds are low and insurance needs are high. But this may not be the case a few years down the road. That’s why when you purchase term life insurance you should make sure there is a convertibility option within your contract. A convertibility option allows you to convert your term life policy into a whole life policy within a stipulated time frame, without having to prove insurability. When your financial position becomes more stable, you may want to opt for whole life insurance that adds a savings component to your policy. Your premiums accrue interest while providing your family with life insurance coverage.
Advantage of Whole Life Insurance
The first question that comes to mind when considering conversion from a term life insurance policy to whole life is: Why would I trade in my inexpensive term life insurance policy for a more expensive whole life policy? You’re not! Whole life has several advantages over term life insurance and there are good reasons why you should consider converting your term life insurance policy to whole or permanent life insurance:
Whole life has a savings component. A portion of the premiums you pay accrues interest which adds to the face value of your coverage.
As you age, life insurance companies consider you to be at higher risk of death. Therefore, premiums go up. If you suffer from any health issues, your premium rates will go up even further. If your term life insurance ends when you are say, 50 years of age, and you still feel the need for life insurance (most people do, at least to cover funeral expenses, etc), life insurance at this age may become an expensive proposition.
With whole life insurance, premiums remain steady throughout life. Since you do not have to worry about your policy terminating after a certain term period, you need not worry about worsening health conditions or increasing age affecting your premium rates.
If you’re hard up on cash, you can borrow money from your whole life policy up to a certain amount, without any questions asked.
Whole life insurance offers lifetime coverage. You must pay premiums up to the age of 100, but when your whole life policy reaches a certain maturity level you can use the interest accrued to pay premiums. If you are still alive after the age of 100, you need not pay premiums but your coverage is still in effect.
The interest accrued along with the face value of the insurance policy is tax-deferred.
Term Life Insurance – Advantages of a Convertibility Option
By using your convertibility option you will be able to convert your term life insurance policy to whole life without have to prove insurability. This means you do not need to go through a medical examination. However, your premiums may go up based on your age at the time of conversion or, in some cases, premiums may be calculated on the age you were when you originally purchased the policy.
You have the option to convert all or a portion of your coverage to a whole life policy. For instance if you purchased a 0,000 term life insurance policy, you could convert 0,00 to a whole life insurance policy and keep your term life insurance coverage at 0,000.
Most term life insurance policies with a convertibility option stipulate a time period within which a term life insurance policy can be converted to whole life. It may be a specified time period after the policy has been issued, or before the policy owner turns a certain age. Before you decide to convert your term life insurance to whole life, you should take financial stock of your life and assess your probable financial position in years to come. Ask yourself questions such as: Do you expect your insurance needs to diminish as time elapses? Do you expect to pay off all your debts before you reach retirement age? Based on your family health history, do you expect any changes in your health as you age? Will you be able to leave enough money behind to pay off your funeral expenses and estate taxes, if any? Many people like to use a life insurance policy to leave wealth behind to their children or grandchildren. Consider your needs and how converting from term life insurance to whole life would benefit you and your family.
What if your term life insurance does not have a convertibility option?
If your term life insurance policy does not have a convertibility option, switch to one which does. You’ll find the best rates for term life insurance online. Ask for free quotes on reliable site certified by the Better Business Bureau. This will give you opportunity to evaluate prices, look for free riders, and compare company ratings. Since such sites have a huge database of reputed life insurance carriers offering competitive rates, chances are you’ll find a term life insurance with a convertibility option that is cheaper than your existing policy!
Dave Ramsey on life insurance
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What Type? Permanent or Term Life Insurance?
Now that you are ready to purchase life insurance, the choice before you is what type of life insurance would best suit your purpose. Life insurance is not a one-size-fits-all product and each one must assess his or her own personal situation to come up with the right coverage and the number of years you would need that coverage. The two broad categories of life insurance open to you are permanent or term life insurance. Let’s take a look at each one.
Term life insurance
This is the simplest type of life insurance and is often considered to be life insurance at its best. You pay a certain amount of premium against a death benefit amount (coverage) that your family would receive in case you die during the tenure of the term life insurance policy. Term life insurance is temporary. This means you can purchase a policy for a period of term, say, 5, 10, 15, 20 years or even longer. You pay premiums monthly or annually. Annual payments work out to be cheaper than paying premiums every month. There is no savings element involved. If you should outlive the policy, the money you have paid towards premiums is gone. To avoid this, life insurance companies also offer a type of term life insurance called return of premium. At the end of the term period, if you are still alive, all the premiums you have paid will be refunded to you, tax free. There are several types of term life policies, such as level term life insurance. Level term assures that your premiums remain level, or the same, during the entire term period. This avoids any unexpected hikes in premiums during your term period that you had not planned for.
Since term life insurance is temporary it is the cheapest life insurance you can purchase. For example, a 40-year old male who is in top health, living in California can get term life insurance for as little as 0.00.
To summarize, here are the main features of a term life insurance policy:
Term life insurance is temporary life insurance and can be purchased for a specific term period. After the term period is over, you would need to renew the policy if you still feel you need to be insured.
Term life insurance is the most affordable.
There is no savings element involved.
Term life can be renewable – look for renewable options that do not require you to prove your insurability after the term period is over.
You can purchase term life insurance at a cheap rate right now and convert to a permanent life insurance policy at a later date. You would need to look for a term life policy that offers you this conversion option.
Permanent Life Insurance
Permanent life insurance (also called whole life insurance) offers lifelong protection. It is more expensive than term life insurance because, along with insurance coverage, there is a savings component attached to it. For the first ten years, your permanent life policy will not accrue much interest. Much of the interest will be used to pay off administrative fees. You cash value will only kick off after that.
Another benefit to owning a permanent life insurance policy is that you can borrow from it anytime you need cash. Interest rates are high, but should you need the money, you are able to take a loan against your whole life policy.
To summarize, here are the main features of a permanent life insurance policy:
Permanent life insurance offers life insurance protection for your entire life provided you pay your premiums.
It is more expensive than term life insurance, but offers a cash value component not found in term life insurance.
You can take out a loan against a permanent life insurance policy.
The premiums remain the same throughout your life.
Permanent or Term Life Insurance?
Most experts recommend that you purchase a term life insurance policy and invest the difference (between term and permanent) in a separate investment instrument. This is more likely to fetch you more money on interest than a permanent life policy would. Others also suggest that life insurance is not something you need for a life time. Growing families, in particular, who have limited income, prefer term life insurance because it is the most affordable and meets their coverage needs most satisfactorily. If you are looking for cheap life insurance from some of the most financially strong life insurance carriers in the industry, request for free life insurance quotes online. Comparing multiple term life insurance quotes online is quick and convenient. Some websites also offer professional guidance to help you make an informed decision.