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What You’ll Learn
Many new homeowners investigate life insurance options to help cover costs in a worst-case scenario
Whole life insurance provides coverage over a policy owner’s entire life.
The premiums may be higher than other policy types, but a whole life policy has a cash value, in addition to the original benefit, that can increase over time.
The cash value of whole life insurance can benefit both the policy owner, who can borrow against it, and the beneficiaries who can receive a potentially higher benefit.
Buying a home is a great investment in your (and your family’s!) future. And while it isn’t the most light-hearted topic to discuss, life insurance is a good way to help protect that investment for years to come.
There are two main types of life insurance: term life insurance and whole life insurance. Explore some of the most commonly asked questions about this insurance type below.
What is whole life insurance?
While term life insurance is for a set term (typically between 10 and 30 years), whole life insurance provides coverage for the entire span of your life. As long as you have an active policy, there’s no way that you can outlive the policy itself. This helps ensure your dependents and beneficiaries receive a benefit.
Considering a whole life policy is important even if you don’t have direct dependents. For example, you can name beneficiaries as people who could use support from you in the form of financial gains. Life insurance is a way to help continue supporting those you care about after you’re gone.
Homeowners, married individuals, parents, and caregivers may find whole life insurance especially important. The benefit your beneficiaries receive will make up for the loss of your income and help them maintain not just the essentials like a mortgage payment, but also their accustomed standard of living. For any caregiving you provide to others, the insurance could make it possible for paid caregivers to deliver that support.
How does whole life insurance work?
For the most part, whole life insurance works the same as many other insurance types. You pay a premium at a set interval in exchange for coverage. In this case, the coverage is a benefit that is issued to your specified beneficiaries in the event of your death.
One of the most unique aspects of whole life insurance is that it incorporates a savings portion that is known as a cash value. That value can be borrowed against during your lifetime like a line of credit. However, any unpaid loan amounts will be deducted from the total benefit when you pass away.
You can also elect for the funds to be distributed in increments, rather than all at once in a lump sum, when the time comes. While incremental payments can accrue interest, keep in mind that the interest is taxable, while the standard benefit is not typically taxed.
What is the difference between term and whole life insurance?
Whole life insurance is distinct from term life insurance because of how long it lasts. Term insurance only provides coverage for a set period of time, typically 10, 20, or 30 years. With a term life insurance policy, you could potentially outlive the coverage, but with whole life insurance, you can’t.
Another difference between the two comes down to cost. The premiums you pay for whole life are generally higher than those with term policies, but you receive additional benefits. First, the coverage won’t end as long as you continue paying the premiums. Second, there is a cash value to the policy that can build up over time, which can increase the benefit your beneficiaries will receive. The cash value also delivers a benefit that could be used while you’re still alive. If you have a major expense, you can take out a loan against the value of the cash your policy has accumulated.
One advantage of opting for whole life insurance first, instead of choosing a term policy, is the ability to lock in potentially lower premiums when buying the insurance from a younger age. For example, if you opted for term life insurance and then wanted a whole life policy when the term ended, you would be required to purchase whole life coverage at an older age with likely higher premiums.
When you select whole life insurance at the outset, your premiums may be lower and may also contribute to the buildup in the cash value of the policy. On the other hand, with a term policy, if you’re still alive after the period ends, there is no way to recoup any of the value of the premiums you paid over the duration of the policy.
Get a whole life insurance quote
Life insurance quotes are unique to individual situations and circumstances, so the best way to estimate the cost to you is to get an exact quote from a provider. You’ll want to know what type of policy you’re interested in most as well as how much coverage you’re looking to have when preparing for a quote. Most financial advisors recommend you have about 10 times your salary in coverage, so that your family will be able to live comfortably for a long period without the income you provided.
A Better Cover agent can help you determine the coverage you need based on your current income and expenses. Once you know that amount, Better Cover can help you get a quote, within minutes, of what a whole life policy, or any other type of life insurance, might cost you.
When requesting a quote, keep in mind that some life insurance companies require a medical exam from a physician before they grant a policy. However, the process of getting coverage through Better Cover is entirely digital as long as you’re seeking less than $3 million in coverage. If you need more protection, we’ll simply ask you to complete a no-cost at-home health check.
Speak to a whole life insurance agent
Life insurance can be an essential component of financial security. But getting coverage doesn’t have to be a burdensome or time-consuming process. Better Cover makes it quick and easy. If you’re about to buy a home, Better Cover can bundle life insurance with your mortgage. Ensuring that your loved ones won’t have to worry about finances if they lose you will provide security that makes every penny you pay in premiums feel worthwhile. To get started, simply request to chat with an agent today.
Disclaimer: Insurance quotes and policies are offered through Better Cover, LLC. A Pennsylvania Resident Producer Agency. License #881593. A full listing of Better Cover, LLC's license numbers may be found here. Better Cover is Registered in the U.S. Patent and Trademark Office.