Finding a life insurance plan can be a complicated decision. With many options, it comes down to choosing between whole and term policies.
According to Harold Greenberg, an agent at American National, who works out of Cleveland for the Twinsburg office; Josh Halpern, partner at Halpern & Associates in Independence; and Michael Leichner, a financial adviser at Leichner Financial Group in Pepper Pike, both types have their positive attributes.
“Term insurance is like renting a house or an apartment,” Halpern said. “At the end, you don’t get anything from it. A whole life insurance policy is like owning the home. Whole insurance plans also generate cash for you. A term only protects you in the event of a catastrophic death happens or to cover temporary liabilities.”
Leichner and Greenberg noted term policies aren’t designed to last a lifetime or even an extended period.
“Policies are designed for 10, 15, 20 and even 30 years,” Leichner explained. “Term life insurance does not have any cash value, they only have a death benefit. Term life insurance policies generally have a lower cost than whole life. But, premiums after the guaranteed period increase dramatically.”
Greenberg added, “All the different kinds of policies may have a place in your life. Think of it this way, term insurance is the kind of insurance that you live beyond. Permanent life insurance is designed to outlive you. Term insurance is for short-term goals.”
When choosing which plan to commit to, the professionals said to consider each plan’s benefits.
“Whole life insurance comes with several guarantees like a guaranteed death benefit so your beneficiaries will never receive less than the face value amount of the policy,” Leichner noted. “Also, the premium is guaranteed to never increase regardless of your health, the economy or age.”
Additionally, he added the value of the plan grows with age, as well as allow for policy owners to receive dividends.
Halpern added the reduced price on a term policy is something that attracts people.
“It depends on your age – term insurance is very easy to get when you’re young, but so is whole,” he stated. “It depends on your budget. But, the goal is getting whole insurance as soon as possible. You can always start on a term and switch over. But, keep in mind whole insurance is cheaper the younger you are and gets more expensive as life goes on.”
Greenberg added, “Term insurance is an initially less expensive financial proposition. So, if you’re raising a family, you’re looking at how many dollars you have available to pay for insurance. But eventually, the permanent insurance will outweigh any cost for the term. It will always payout.”
Leichner added families should consider whole insurance plans because of its other benefits.
“The death benefit generally passes income tax-free to your beneficiaries, and in most states, it is protected from creditors,” he said. “The cash value will grow tax-deferred, which means that while the cash value grows you do not pay income tax on it, allowing it to grow faster. The cash is yours to use during your lifetime and you can access it income tax-free.”
Choosing a life insurance plan is an important decision.
“It’s really about what you need,” he said. “It’s not anything to be taken lightly. It’s about finding out what (a client) feels more comfortable with. If something were to happen tomorrow, would you feel OK with this plan? It’s also important to feel comfortable with the person you’re working with.”
Leichner said, “The type of insurance that would better for you depends on your goals and objectives. To find the right type of life insurance, you should consult a life insurance agent or a financial adviser. They would help you determine which plan is best.”
Halpern added, “(Life insurance) is complicated, hard to understand. If you don’t research it every day, you’re going to miss things. It’s good to go with an AAA-rated business that you know will still be around when you have to cash that plan out.”