Senior Whole Life Insurance vs. Term Life Insurance
The primary advantages of senior whole life insurance is guaranteed death benefits, guaranteed cash values, fixed and known annual premiums, and mortality and expense charges will not reduce the cash value shown in the policy.
Life insurance policy is an important decision for any consumer to consider, and there are many factors that complicate this already gravid choice. Perhaps first and foremost is the choice between term life insurance and whole life insurance policies. The distinction between the two is major, and we will examine the advantages of selecting a whole life insurance policy over the often less valuable term life benefits.
First of all, senior whole life insurance policies just like all whole life insurance policies provide guaranteed benefits upon the insured’s death to the beneficiary, while term life policies may not. The main reason that anyone purchases life insurance is most often to gain peace of mind, but there is no peace of mind to be gained in a situation where the benefits may not be available. Many companies offering term life benefits will require the insured to submit themselves to insurability tests at the end of each term, and may decline to extend terms if they deem that the insured represents too great a liability. In short, term life insurance may be denied to those that the insurance company thinks is a risky investment. They may also renegotiate terms at a much higher premium, or present other caveats that make the policy exorbitant or even prohibitive. In a whole life policy, your benefits remain with you for as long as you keep current with your premiums.
There is a degree of predictability built in to the whole life insurance model that makes it very attractive. Premiums, cash values, and death benefits are all fixed at the time of the initial negotiation and not subject to change. This means that while other expenses may fluctuate, the cost of premiums and the benefits of holding the policy are always known to the insured and can be planned on. Early in life this can seem like a simple convenience, but at retirement age when income is fixed and opportunities are limited, this reliability can be extremely important. It is difficult to plan in the face of unknown variables, and a whole life insurance policy eliminates some fairly significant variables.
Whole life insurance policies also can provide a source of income, particularly important to seniors. The cash value of the policy can be accessed in the form of interest-free loans against the value of the death benefits. These loans are considered tax-free income, and as they are borrowed against the benefit value itself, they do not need to be paid back by the insured during life (in which case they will be paid out on death from the benefits value).
Whole life insurance dividends can be used in many different ways. In the event that Paid up additions is chosen by the insured, then the dividend cash values will be leveraged to purchase even more death benefit. This will in turn increase the death benefit received by the beneficiary under the terms of the policy. Others opt to apply the dividends against the cost of the premiums, reducing the out-of-pocket expense paid to maintain the policy, although the value of the dividends can be variable while the price of the premiums is not. Of course, the third option is to take dividend payments as cash on a regular interval basis.
Term life insurance may seem like an attractive option because of its initially lower cost, but ultimately whole life policies have more value. Over the life of the policy, an insured living to life expectancy can expect to pay about the same cost per year as a term life consumer, but will receive guaranteed death benefits, predictable costs, potential income, and access to many different dividend management options.