We all know that having life insurance is important, and we know why. None of us want to leave our families with the financial burden of paying for our funerals etc. Also, for many death occurs at a poor time in life. Some still have small children, mortgages to pay, and other debts that would greatly burden their loved ones. So, life insurance is a way to ensure your family is taken care of after you are gone, it is an expression of love.
So, why doesn’t everyone have life insurance?
Well for many it is because it is too expensive. For some policies, the cost of life insurance can be well over $350 a month. This is not something many can afford for the coverage that they need.
There are two types of life insurance, whole life, and term life. Whole life is the ideal should you have enough money to afford the monthly premiums, it is a great investment as you usually get dividends on your premium, and you are guaranteed coverage at the rate purchased, for ever.
Term life insurance on the other hand is not something you get dividends on, and the rate will increase after the term due to your age increasing. So, the real question is, why would you choose term life over whole life? The answer, cost! Term life insurance is generally regarded as the most affordable form of life insurance. With term life insurance, you choose the amount of money you want to leave behind to your relatives, and that plus your age, in turn, decides the amount you pay monthly. With term life insurance, you choose how long you want the policy to last at the premium you choose. Then you pay a fee for that amount of time, and no other. Once the time frame is up you have to reapply or extend your coverage.
Term life insurance is more user-friendly, more adapted to meet individual needs and realistic life situations. It’s not usually affordable for a family to fork over a lot of money every month for life insurance. However, term life insurance can more realistically fit into a tight budget.
For example, for a whole life insurance policy of $350,000 for a male that is 27, you would be looking at around $300 a month, for the same amount of coverage, age, and gender, but with term life insurance, you are looking at $26 a month. That is a significant difference that can mean being able to afford, and not being able to afford life insurance.
So choose term life insurance if your goal is simply to obtain coverage and fit it into your budget. Choose whole life insurance if your goal is to make life insurance an investment, and have the same premium and guaranteed coverage for life, even if the premium is higher.