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Choosing Between Term and Whole Life Insurance

06 Feb Choosing Between Term and Whole Life Insurance

Posted at 16:57h in Business by William Smith 0 Comments

CHOOSING BETWEEN TERM AND WHOLE LIFE INSURANCE

Term life is sufficient for most families who need life insurance, but whole life and other forms of permanent coverage can be useful in certain situations.

Choose term life if:

Choose whole life if:

You need life insurance only to replace your income over a certain period, such as the years you’re raising children or paying off your mortgage

You want the most affordable coverage

You think you might want permanent life insurance but can’t afford it. Most term life policies are convertible to permanent coverage. The deadline for conversion varies by policy.

You want to provide money for your heirs to pay estate taxes. In 2017, estates worth more than $5.49 million per individual and $10.98 million per couple are subject to federal estate taxes. State estate taxes vary. Here’s a map of state estate and inheritance taxes from the Tax Foundation.

Without a life insurance payout, your heirs might be forced to sell off parts of the estate, such as heirlooms or property, to pay the tax bill.

You have a lifelong dependent, such as a child with special needs. Life insurance can fund a special needs trust to provide care for your child after you’re gone. Consult with an attorney and financial advisor if you want to set up a trust.

You want to spend your retirement savings and still leave an inheritance or money for final expenses, such as funeral costs. With a whole life policy, your beneficiaries get a payout no matter when you die.

You want to equalize inheritances. If you plan to leave a business or other property to one child, you could use whole life insurance to compensate your other children.

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