Some experts recommend that you buy a combination of both whole and term life insurance policies. Is this sound advice? If not, why is it wrong? If it is, why is it and who is it right for? We'll look at this in this article...
Before we go further, I'll like to ensure all my readers understand the difference between these two life insurance policy types: Whole life gives you coverage for your entire life provided you do NOT refuse to pay your premiums. It gives you cash value. You can borrow from it. You can also decide to cash in your policy before it due time. It has very many advantages. However, it's also very expensive.
Term life, on the other hand, covers you only for a specified term (from one year to 30 years), hence the name. It does NOT build cash value. It just gives you plain insurance for the period chosen. If you outlive the term, your beneficiaries get nothing. If you pass on within the chosen term, the get paid the coverage amount you bout. Because of its very limited features, it gives much more coverage for each premium dollar paid.
Now that we've got these cleared up, let's get into the meat of the discussion...
First and foremost I'll like to point out that there is sense in this advice. However, you'll have to look at the arguments for this and then decide if it's best for your peculiar circumstance.
Experts who recommend this combination suggest that you buy a whole life insurance policy early in life. You'll generally get the best rates in your younger years. However, they advise that you buy enough coverage for your general concerns. Furthermore, you'll be able to build cash value. This particular policy, they advise, should not cater for periods in your life that you need a lot more coverage.
It is for the periods of peak activity that they recommend that you buy a term life policy. These periods include when you start raising kids, have outstanding mortgage, are exposed to many hazards in your place of work and other situations like these.
They argue that since these periods won't last through your lifetime you should buy a whole life policy for such periods since they are for a lifetime and therefore a lot more expensive (Your kids will one day leave your home and be able to fend for themselves. Then they won't need you to get them life insurance coverage).
Term life, which is a lot cheaper and for a specified period, will help you buy much more coverage for a lot less. All you have to do is to buy a policy that has a term long enough to cover such a period of much life insurance coverage need.
Let's assume that you have young kids and still have outstanding mortgage. Let's say you project it will cost a total of $1 million to put them through college of your dream, help them get started in life and help your spouse maintain them at the level of comfort they are used. Let's also assume that you have an outstanding mortgage of $500K that will take the next 25 years to pay off.
All you'll have to do is get a term life policy for $1.5 million for a 25 year term. At the end of this time there won't be any mortgage to pay and your kids should now be fending for themselves.
If you live beyond the term, you won't need that level of coverage and you can make do with your whole life policy alone. But if you do need it, your family will get a lot more benefits to take them through the tough times.
Do the smart thing. Do thorough comparison shopping. That is, get and compare quotes from a very wide range of insurers. Hopefully, the total you'll pay for this combination will be much less than you thought.
Here are great pages for life insurance quotes...
InsureMe Life Insurance Quotes
Chimezirim Odimba writes on insurance.
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