An increasing number of new families are choosing a combination of whole life insurance and term life insurance to protect themselves. Learn how this choice benefits them, and see if it could benefit you.
In an increasingly uncertain world, families are seeking ways to protect themselves without breaking the bank. Although the economic downturn has stopped some families from seeking coverage, many have responded by determining new ways to get the most for their dollar. One of the most popular ways to save is by holding both a whole and a term life insurance policy at the same time.
Benefits Of Buying Whole Life Insurance Early
Whole life insurance is distinct because it offers coverage for the entirety of an individual’s life, provided that life does not continue past age 100 (or 120). One of the benefits is that the rate that an individual receives at the beginning of the coverage period will endure throughout the duration of the coverage. In essence, by purchasing this particular type of coverage early, an individual is ensuring protection as well as low rates.
Age and health are the biggest factors that determine how much an individual pays for any type of policy. When an individual is young, the company knows that they are unlikely to cash in the policy anytime soon. In essence, the company gives the individual a lower rate because that company knows they are likely to profit from the individual’s payments rather than having to pay the individual in the near future. However, as age rises and health decreases, the company’s risk increases and they must charge higher rates to remain solvent. The only way to ensure the lowest rates is to acquire a policy at a young age.
Supplementing Your Lifelong Policy With Term Life Insurance
One drawback of a lifelong policy is that it is prohibitively expensive for large amounts of coverage. Because it is guaranteed to be cashed at some point, a lifelong policy must be slightly more expensive per dollar of coverage obtained; otherwise, the issuing company could not remain financially viable. Many families are taking advantage of a simple, yet little-known fact about coverage: a single individual can hold several different policies at the same time. In the case of young families, the breadwinners typically choose a lifelong policy at a lower level that will continue for as long as they are alive, and then complement that with a term life insurance policy that will last only as long as their children need support.
During the time when children are in the house, the amount of coverage needed for the parents increases dramatically. Once those children are grown, the need for a high amount of coverage decreases. If they chose a lifelong policy, they would quickly find themselves overpaying and over-insured as generally, once a lifelong policy has been selected, its coverage amount cannot be changed. The solution many families have found is to use term life insurance to cover the period when they have children in the house. Term life insurance allows them to cover a specific period of time at a lower rate. Because term life insurance does not necessarily end up being used, companies are able to offer significantly reduced rates in comparison to lifelong policies.
Putting The Strategy Into Action
The first step to buying whole or term policies is to find a licensed insurance broker. Even the best suggestions are only suggestions, and should always be discussed with an experienced planner who can take into account your unique financial situation. Once you have covered the basic ideas of the plan with a broker and he or she has agreed that combining whole and term life insurance is a wise decision, you should begin comparing different plans available.
There are many options for comparing policies. Your broker may be able to provide options, but you should also be sure to check online. Many families were able to find better deals on both whole and term life insurance by using online quote comparison sites. The best providers of online quotes are also able to offer assistance filling in the actual coverage application, which used to be an advantage reserved for in-person broker offices.
The Coverage You Need, When You Need It
By carrying two types of coverage, families are able to avoid being over-insured, keeping their hard-earned money for other uses. Whatever your family decides to do about protection, ensure that you will have enough. Ensure that your estimates are accurate and always err on the side of caution. It may seem overly cautious now, but if your family ever loses you, it will make a big difference to their quality of life.
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