Deciding on a life insurance policy can be difficult, especially when dealing with the insurance world jargon. One of the first steps in choosing a policy is deciding which type of policy you will be needing. The two most common types of life insurance policies are Term Life and Whole Life.
TERM LIFE INSURANCE
Term life insurance is the most common choice. Term life insurance provides coverage for a period of time, like 10, 20, or 30 years. This is why it is most common for individuals who are building their savings or only need life insurance for a specific amount of time.
Term life insurance is the most popular for individuals who are looking to primarily protect their loved ones or dependents in the event of their death because it provides a guaranteed death benefit. However, for individuals who are looking to invest in their life insurance policy, term life insurance is not the way to go due to the fact that it does not build cash value inside of the policy.
Another reason term life insurance is popular is due to the price. With term life insurance, you are able to choose how long you need the policy, so the price can be very flexible. This is what makes term life insurance the most affordable type of policy. So when you’re just starting a financial plan, savings, or a family, term life will allow you to have coverage while not jeopardizing your bank account.
Term life insurance is the most common choice for doctors because of the flexibility of the policy term as well as price. Until the event of death, most physicians will have had put away enough savings, so a term life insurance policy will ensure that they are covered until that point
WHOLE LIFE INSURANCE
Whole life insurance can be helpful as you get older as it can help cover some of the final expenses that term life wouldn’t. Whole life insurance will provide you life insurance forever because it is a permanent policy type. Whole life can be a good option for those who can afford it.
Since whole life insurance never ends, it can be costly. Typically a whole life insurance policy will be 8-10 times more than a term life insurance policy. In most cases, when physicians purchase whole life insurance they are wasting their money because once you reach a certain age, a life insurance policy will be replaced by retirement funds or savings.
Whole life policies are also more expensive because of their policy cash value which can be used for investing. The cash value of the policy will grow slowly and is tax-free on the gains that your policy accumulates. However, the key piece of information is that the cash value growth is slow, projected at 2%-5%. Most of the time, investing your money somewhere else will be more beneficial.
When comparing term and whole life insurance doctors, we recommend a term life insurance policy simply because the added cost of the whole life insurance policy outweighs the benefits. In most cases, physicians are able to build their funds quickly, making term life insurance the most common choice.
In the end, there is no “one size fits all” policy. The decision is up to you and your financial situation, but it is always smart to look at both options! As always if you have any questions or need help comparing your options, feel free to contact us or get started with your life insurance quote request here!
If you are interested in learning more about term and whole life insurance check out the “What Type of Life Insurance Should I Get?” blog post here!
If you are interested in finding out your ideal coverage amount use our insurance needs calculator here!