Which type of policy is best for you, term or lifetime? The answer depends on several factors, including:
Your needs. If you only need coverage until your kids graduate from college, for example, you might be better off with a term life policy.
Cash value insurance is best suited for long-term needs, such as estate tax planning and your spouse's lifetime coverage. Some term policies cannot be renewed for 70 or 80 years and can become expensive to renew as they approach that age.
The cost. If term life insurance is more suitable for your budget and you want lifetime coverage, consider a term life policy that can be converted into a whole life policy. Then you can convert the policy whenever your cash flow or needs dictate. You can also buy a combination of term and whole life insurance and gradually transition into whole life insurance over time.
Your savings and investment goals. Whole life insurance can be a good long-term investment vehicle, particularly because the cash value has the potential to grow for tax purposes. If you no longer need the insurance but want some extra cash, you can drop the policy and collect the accumulated cash value. Be sure to discuss the tax implications with your tax advisor first.
As an alternative, you can buy term life insurance and invest what you save on premiums on your own. Compare the returns you can expect and don't forget to consider taxes if you plan to select taxable investments.
So should I buy term life or whole life insurance? Both term life and whole life have benefits, including immediate family protection. Deciding what type of policy and what features are right for you, close attention and, most of the time, an understandable look at your financial plan. To discuss your life insurance needs and financial requirements, contact your financial professional.
