Table of Contents
The Intro
Two insurance brokers quickly make their way around the halls of a real estate brokerage. The couple are closely scavenging for a particular suite number as multiple rooms are passed by.
Finally coming across the digits they were pursuing, they excitingly welcome themselves in.
Seated at a round table and typing on a laptop is a middle-aged fellow wearing a casual business suit. He’s definitely a realtor.
A few feet behind him at a separate table typing himself is another fellow. This one’s a bit younger but probably is also a realtor.
Insurance Broker #1
Kurt?
The man at the round table looks up from his computer as his name was called.
Kurt
Oh Jesus…..
The gentleman sitting a few feet behind him looks over at the surprise visitors as well. Out of curiosity.
Insurance Broker #2
Heyyyyy.
Insurance Broker #1
My name is Chris. And this is Chris. We’re your insurance brokers from The Insurance Agency of Chris. My Chris is spelled like the C-H Chris, but hers is actually spelled with an L.
Insurance Broker #2
Yeah, it’s silent. In the beginning. I think it’s like the first or second letter.
Kurt
Wow. Guys, I apologize, I totally forgot about our appointment. I actually have some important business dealings to tend to in a few minutes and don’t have any time.
Insurance Broker #1
Well, that’s alright. This’ll only take an hour and 45 minutes.
Insurance Broker #2
Yeah, how old are you Kurt?
Kurt
Guys… Some other time, please.
Insurance Broker #1
You know Kurt, life insurance is very important. There’s many…
Insurance Broker #2
What’s your social security number?
Insurance Broker #1
Woah, woah, woah… Life insurance is very important. There’s many ways life insurance could be used to protect you and your family…
Kurt
I understand that. That’s why I booked an appointment, but now’s not the best time any longer.
Insurance Broker #1
Have you ever heard of Term Life Insurance?
Kurt
Guys…
Insurance Broker #2
Ever heard of Whole?
The man gives up with one deep breath.
Kurt
No.
Insurance Broker #1
Well, Kurt, those are the two basic types of life insurance. Wanna know the difference between the two?
A few seconds of silence pass by.
Kurt
Enlighten me.
The Difference Between Term & Whole Life
Term Life Insurance Definition
Term Life Insurance is a form of life insurance that covers you over a certain amount of years (Usually 1-30).
Whole Life Insurance Definition
Whole Life Insurance is a form of life insurance that covers you for a stated benefit over the course of the rest of your life.
The Similarities Between Term & Whole Life
Both of these basic forms of life insurance feature many different types of policies, each with unique features.
All life insurance plans will charge you premiums. These could be scheduled as monthly, quarterly, semiannual, or annual payments.
The more basic forms of term & whole life coverage will feature a premium schedule that’s quite consistent as your price never changes over time.
The more complex plans, however, could feature premiums that fluctuate throughout your policy period. All depending on the circumstances tied to your policy whether there’s stock involvement, dividends, etc.
One of the greatest benefits is that your coverage is guaranteed once your policy is active. So if health issues arose or it appeared that your lifespan may be cut short, the insurance company can’t legally change your coverage in any way. Long as all premiums remain paid-up of course.
So What’s Better? Term or Whole Life?
Term Life Insurance Strengths
- – Lower cost of coverage.
- – High coverage options ($1M & Up) are more widely available.
- – Not a lifetime commitment.
Whole Life Insurance Strengths
- – Lifetime protection.
- – A cash-value component is included. This feature allows you to build financial value into your policy every month so that if you one day decide you no longer want to have coverage, you could end the policy and receive its value in cash.
- – Flexible loans are accessible to all those who have any available cash-value in their policy. These loans could be taken out as you wish and don’t require a credit-check.
- – Policies don’t automatically lapse when you miss a premium payment. Thanks to the flexible loan feature, money could be borrowed from your policy’s value and help you maintain coverage.
Term Life Insurance Weaknesses
- – Coverage is not permanent. If you outlive the policy and don’t have any return-of-premium clause included in your plan, you don’t receive any benefits. Same goes for if you waive coverage at any point during the policy period.
- – Not much security is provided if you can’t afford your premium on any particular month.
- – Term Life is a much less secure long-term life insurance option due to the risk of health changes and how that could impact your ability to maintain affordable coverage at the end of each term period.
Whole Life Insurance Weaknesses
- – May require a lifetime commitment to paying premiums if you would like to acquire the full benefit.
- – Your benefit may not maintain the same value it has today due to inflation.
- – Cash-Value loan debt could dramatically reduce your benefit if you pass away before paying it off.
The Verdict
Kurt
So which one of these plans would you guys say is better?
Insurance Broker #1
Term!
Insurance Broker #2
Whole!
Kurt’s confused by the contrasting opinions.
Insurance Broker #1
Well, I guess we could take a deeper dive…
Which should you choose? Term or Whole?
The answer to this great question all really just comes down to your reason for pursuing coverage.
Here are some sample reasons one should consider acquiring either policy…
Reasons to Get Term
Income Replacement for Family
Mortgage Protection
Income Replacement for Spouse
Debt Defense/Maintaining Assets
Key-Person Insurance
Collateral
Care for an Aging Parent
Reasons to Get Whole
Estate Protection
Funeral Planning
Providing for Final Expenses
Situations Where Either Plan Could Work
Traditional Inheritance
Providing Business Capital
Supplying Financial Assistance
Securing College Tuition
The Conclusion
Insurance Broker #1
Did we do a good job in explaining things Kurt?
Kurt
You have.
Insurance Broker #2
So which one would you prefer?
Kurt
Neither.
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