The two sides do not even agree about whether a person needs life insurance. Whole lifers say, yes. You do not want the death of a family member to disrupt your family s finances or jeopardize its future. It is hard enough to adjust to the loss of a loved one. Adding financial difficulties exacerbates the problem. With the skyrocketing costs of funerals, even children and seniors should have at least a small life insurance policy.
Not so fast, say the term lifers. The only reason to have life insurance is to replace the lost income of a family member who dies, and then only when the spouse or family is dependent on that income. If you are single with no dependents and no debts that might be transferred to your family in the event you die, then you do not need life insurance. If you are married and your spouse works, you probably do not need life insurance, either, assuming your spouse makes enough to support himself or herself.
The time for life insurance, term lifers say, is when the policyholder s income is vital to the financial security of the family. If, for example, you have purchased a home together and your spouse could not pay the mortgage and other bills by himself or herself, then life insurance is in order. If you have children, you will want to have enough life insurance to allow your family to maintain its lifestyle after you are gone. This includes not only meeting day-to-day expenses, but also being able to follow through with plans for higher education. Insurance professionals recommend buying a policy with a face value 5-10 times the breadwinner s annual salary to help family meet expenses for a period of years.
Whole lifers see problems with the term-life scenario. The view it as overly optimistic, even na ve. Many things can happen during the 20- to 30-year period covered by term life insurance that could extend the need for coverage beyond the policy s end date. For example, children may be born mentally retarded, with severe autism, or with another serious condition that could prevent them from becoming independent when they reach adulthood. Children also can develop a disease or suffer an accident that disables them. A spouse, too, can become disabled. In these situations, the family will remain dependent on the breadwinner s income long after the term life policy expires.
Term life insurance advocates point out that in such cases, the breadwinner can renew the term life policy, or take out a new one. Now it s the whole lifers turn to say, Not so fast. By the time the second term life policy is needed, the breadwinner will likely be in his or her fifties or even sixties. Due to the age of the insured, the cost of a second term life policy will be much higher than the cost of the first was. With the added years come added risks of certain diseases. If the breadwinner is obese, has developed high blood pressure, a heart condition, diabetes, or another disease, the cost of the term life policy will skyrocket. If the individual has developed cancer or AIDS, he or she may not be insurable at all. In such situations, the cost savings realized on the first term life policy could be wiped out by the high cost of a second term life policy.
By contrast, the premiums of a whole life policy are set for life and do not go up with age or medical condition. A whole life policy cannot be canceled due to medical conditions, either. The policy remains in force until death, as long as the premiums are paid.
Until death is another advantage of whole life, its advocates maintain. Whole life gets its name from the fact that it insures the policyholder life until death. As a result, whole life insurance is guaranteed to pay a death benefit the amount the policy pays upon the death of the insured. The death benefit can be increased at certain points at no additional cost as the policyholder ages. A small policy designed to cover the funeral costs of a child can be increased to provide adequate coverage during an adult s peak earning years. Whatever the death benefit or face value of the whole life policy, the insurance company guarantees to pay it. As a result, the policyholder or his or her beneficiaries always receive some, all, or more than the premiums paid into the policy.
This is not the case with a term life policy, whole lifers point out. The term life insurance policyholder can pay premiums for 30 years, but if he or she outlives the policy even by a day then all of the premium money is gone. The only thing the policyholder will have received is 30 years worth of peace of mind.
Not so fast, say the term lifers. The only reason to have life insurance is to replace the lost income of a family member who dies, and then only when the spouse or family is dependent on that income. If you are single with no dependents and no debts that might be transferred to your family in the event you die, then you do not need life insurance. If you are married and your spouse works, you probably do not need life insurance, either, assuming your spouse makes enough to support himself or herself.
The time for life insurance, term lifers say, is when the policyholder s income is vital to the financial security of the family. If, for example, you have purchased a home together and your spouse could not pay the mortgage and other bills by himself or herself, then life insurance is in order. If you have children, you will want to have enough life insurance to allow your family to maintain its lifestyle after you are gone. This includes not only meeting day-to-day expenses, but also being able to follow through with plans for higher education. Insurance professionals recommend buying a policy with a face value 5-10 times the breadwinner s annual salary to help family meet expenses for a period of years.
Whole lifers see problems with the term-life scenario. The view it as overly optimistic, even na ve. Many things can happen during the 20- to 30-year period covered by term life insurance that could extend the need for coverage beyond the policy s end date. For example, children may be born mentally retarded, with severe autism, or with another serious condition that could prevent them from becoming independent when they reach adulthood. Children also can develop a disease or suffer an accident that disables them. A spouse, too, can become disabled. In these situations, the family will remain dependent on the breadwinner s income long after the term life policy expires.
Term life insurance advocates point out that in such cases, the breadwinner can renew the term life policy, or take out a new one. Now it s the whole lifers turn to say, Not so fast. By the time the second term life policy is needed, the breadwinner will likely be in his or her fifties or even sixties. Due to the age of the insured, the cost of a second term life policy will be much higher than the cost of the first was. With the added years come added risks of certain diseases. If the breadwinner is obese, has developed high blood pressure, a heart condition, diabetes, or another disease, the cost of the term life policy will skyrocket. If the individual has developed cancer or AIDS, he or she may not be insurable at all. In such situations, the cost savings realized on the first term life policy could be wiped out by the high cost of a second term life policy.
By contrast, the premiums of a whole life policy are set for life and do not go up with age or medical condition. A whole life policy cannot be canceled due to medical conditions, either. The policy remains in force until death, as long as the premiums are paid.
Until death is another advantage of whole life, its advocates maintain. Whole life gets its name from the fact that it insures the policyholder life until death. As a result, whole life insurance is guaranteed to pay a death benefit the amount the policy pays upon the death of the insured. The death benefit can be increased at certain points at no additional cost as the policyholder ages. A small policy designed to cover the funeral costs of a child can be increased to provide adequate coverage during an adult s peak earning years. Whatever the death benefit or face value of the whole life policy, the insurance company guarantees to pay it. As a result, the policyholder or his or her beneficiaries always receive some, all, or more than the premiums paid into the policy.
This is not the case with a term life policy, whole lifers point out. The term life insurance policyholder can pay premiums for 30 years, but if he or she outlives the policy even by a day then all of the premium money is gone. The only thing the policyholder will have received is 30 years worth of peace of mind.
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