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The Facts About Life Insurance

Some of our clients at The Heuman Insurance Agency in Washington are fortunate to have whole life insurance through the company where they work. But still, they come in to inquire whether it would be a good idea to supplement it with a term life insurance policy. Others have no life insurance at all and are wondering which would be better for their current situation in life.

Fundamental Differences between Whole Life Insurance and Term Life Insurance

Unlike whole life insurance which is a permanent type of insurance, providing lifetime coverage in exchange for premium payments, term life insurance, as the name signifies, provides financial protection for a specific period of time such as ten or twenty years. Premium amounts are fixed for both types, but more expensive for whole life since it provides lifetime coverage. Some term life policies offer extended coverage after the term has ended, but usually at a substantially higher rate.

Cost Determinants

Insurance companies place individuals in risk categories to determine how much either type of policy will cost. They look at several factors including the applicant's age, lifestyle, overall health, and family medical lifestyle to place him or her in a rate class. For example, smokers or people with certain health conditions will pay higher premiums than non-smokers or those with optimal health.

Other Considerations

We usually point out to clients that cost shouldn't be the only factor in deciding which type of policy is better for them. They should also consider what financial needs they are expecting the policy to fill.

  • • If their main concern is income replacement for their families should they die during their working years, term life insurance can be the better way to go.
  • • If they are looking for wealth preservation and tax-deferred accumulation over their lifetime, whole life might be their choice.

No matter which they choose, the payouts their designated beneficiaries would receive are generally exempt from income tax.

A Hard Topic

At The Heuman Insurance Agency, we recognize that life insurance, since it comes with an acknowledgment of our mortality, is a difficult subject to discuss. That's why we promise that every one of our Washington agents will strive to be as open and honest when you come in to discuss such an essential part of your long-term financial plan. Contact our office to get a quote and have your questions answered.

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