Category Archives: Insurance Blog

Term vs. Whole Life

TERM
Advantages:

  • Initially premiums are lower than those for permanent insurance
  • It allows a person to buy higher amounts of coverage, especially at a younger age
  • This is a great product for young families that often have a limited budget, but a significant need for protection
  • It can cover specific needs that will disappear in time, such as a mortgage or other types of loans
  • Certificates are renewable

Disadvantages:

  • Once term ends, if you purchase a new certificate the premium increases due to age
  • Certificate premiums increase based on age of applicant
  • Coverage terminates at the end of the specified term
  • You may not be able to convert to permanent insurance because of health
  • Does not accumulate cash values or dividends

WHOLE/PERMANENT

Advantages:

  • Guarantees lifelong protection as long as premiums are paid
  • Generally, premium costs are fixed
  • Develops cash values, which can be borrowed against; loans must be paid back, otherwise death benefit will be reduced by the amount of the loan at time of death
  • Cash values can be surrendered, in total, or in part, for cash or to convert to an annuity
  • Cash values can be used to pay future premiums or provide paid-up insurance
  • Generally dividend participating – can be used to reduce the amount of future premiums needed or purchase additional paid-up insurance

Disadvantages:

  • High initial premium levels may make it hard to buy enough protection
    May be more costly than term, especially if you do not keep it long enough

In most cases, a permanent plan may be the best type of life insurance to purchase. If the prospects are a young family with a home, cars, loans etc., and appear to need high amounts of coverage or if they wish to insure for a specific period of time, then term insurance may be the right plan.

3 questions to answer: Do you need insurance? How much? What type?

Contact your local PRCUA Sales Representative and complete a Needs Analysis to determine which plan will accomplish your goals.

Whole Life Insurance Getting Renewed Attention – Here’s 5 reasons why:

  1.  Over a lifetime, whole life insurance generally provides a greater rate of return of premium to death benefit and also the best cost arrangement as measured by present value of premiums relative to cash values.
  2. The average mortality rate has increased in recent years due to medical technology advances, greater access to healthcare, and wellness living and eating. How many commercials have you seen in the last week, which speaks about health club memberships or healthier food choices, its everywhere. Whole life guarantees the death benefit coverage as a person ages without increasing premiums on existing coverage as long as premiums are paid.
  3. The current low interest rate environment, which yield small returns on bank and fixed income instruments, whole life’s cash value growth is now seen as a stronger-yielding product with similar risk profiles. The cash value element is often considered as a bond or CD alternative.
  4. The cash value growth component in whole life is an attractive way to create a fund source that can be used to support college education planning or to use as a rainy day fund mechanism. It is not only meant for the beneficiary but cash value funds can be utilized by the owner while the insured is alive.
  5. For business planning purposes, a whole life policy can be used to fund buy-sell agreements or to provide executive benefits to help retain key employees. When the need is long term and strong guarantees are required, permanent life insurance should always be considered, premiums never increase and the death benefit is guaranteed as long as premiums are paid.