Experts

What The Experts Say –

With several life insurance options to choose from, most men wonder which policies are going to be best for their family.

Nowadays, providing for your family in the event of your death is an issue that faces both middle-aged men and those with their first child on the way. With several life insurance options to choose from, most men wonder which policies are going to be best for their family.

By and large, term life insurance policies for 20 years are the most popular form of life insurance that dads (and moms) are investing in to protect their families. While year-to-year was the most popular in years past, 20-year policies make the most sense for the majority of men to protect their families.

Here’s why.

Life insurance for adults serves one purpose: to pay out in the event of an unforeseen death. Twenty- or 30-year policies that insure you over the dependent years of a child make the most sense for new dads and 20-year policies also work for men in their 40s because it insures them for the remainder of their working years. But, determining which policy is right for an individual with a family will depend on a number of circumstances.

Term vs. Whole Life: What’s the Difference?

In the simplest terms, whole life insurance insures you until your death, whenever that is, while term life insurance insures you for a specific period, say 20 years. In other words, you may very well outlive a term life insurance policy. While some folks find term life insurance too limited in coverage, others will find that whole life insurance outlives its usefulness.

Overall, term policies tend to be cheaper than whole life insurance policies. Whole life insurance policies are based on what’s called a mortality cost. That means the older you get, the higher your premiums go. Even if you’re paying a fixed rate, the cost is averaged into the monthly premiums. On the other hand, term life insurance operates on (more or less) a fixed-rate mortality cost that is cheaper for a specific reason.

Whole Life Insurance Covers Costs Based on Investment

It’s important to note that whole life insurance can cost up to 10 times as much as a term policy. The questions then become, what are you getting in return, and how is the insurance company making money on the investment?

Curiously, whole life insurance is sold as a retirement planning tool. But fundamentally, the insurance company is taking the extra money that they get from a whole life policy, and investing it in various places in the market. Ostensibly, this money should be increasing the value of your life insurance policy, but in reality, it is both covering the cost of a potential payout, and also allowing the insurance policy to pay for itself. That means that even while you’re paying into the whole life insurance policy, it’s already made money for the insurance company. If you’re wondering why you don’t simply invest the money yourself, then you’ve reached the conclusion that so many others have as to why term life insurance policies are the better option.

Is this universally true? Of course not, but for most dads and moms looking to protect their family, term life insurance gives them the exact amount of coverage they need and is the better option.

Photo: Pixabay

 

 

 

 

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