LIFE INSURANCE ADVICE

“The third option is that other possibility…”
– Lynn Barrette, Counselor and inspirational blogger

Life Insurance: It’s Not An Either/Or Decision

“Whole Life or Term Insurance?” It’s a never-ending debate amongst financial advisors and self-proclaimed experts. Today, we’d like to suggest a third option.

But first… let’s summarize the two most popular and obvious choices:

Term life insurance is life insurance purchased for a limited time, such as 15 or 20 years. Term insurance is affordable, providing the insured with more coverage for less premium. Thus it puts a greater protection in place, in the form of a death benefit. However, term life insurance policies rarely provide that benefit, because of the limited time frame of the coverage. They are less expensive because they almost always expire (like product warranties) before they’re likely to be used.

Like most other insurances, term life is an “if” insurance, not a “when” insurance. A benefit is paid only IF your house burns down, IF your car is vandalized, or IF someone passes away long before expected.

There are two types of life insurance that we heartily recommend. One is dividend-paying whole life insurance—usually set up to maximize cash value, if that is the policy holder’s desire—and term insurance that is convertible to whole life. (Read “Convertible Term Insurance: The Third Option” for an excellent primer on convertible term life insurance.)

If you have convertible term life, how and when should you convert it to whole life? Today, we address what happens “next” in the process of converting convertible insurance. We also address the reasons WHY it is beneficial. But first, let’s start with a quick recap on what we mean by convertible term insurance.