Compare and contrast: Term and whole life insurance.
Both offer valuable protection, but each has different features. Which one may be right for you?
Needs evolve. And your insurance should change with them. But deciding what product is best for you can be difficult. While there are benefits to retaining your term policy, many people enjoy added protection by converting to a permanent or whole life insurance policy.
The value of term life insurance.
Term life insurance is designed to help people purchase the protection they need when they can’t afford to purchase permanent life insurance or when they only need coverage for a specific time period. Term life has a guaranteed death benefit but no cash value and the premiums will increase at pre-determined intervals such as after one year, five years, 10 years, or 20 years, depending on the kind of policy you purchase.
It’s also very often the product of choice when protection needs may be high for a period of time, such as when your family is growing. Term life can also be an effective way to supplement permanent insurance during high-need years, such as when family and other financial responsibilities are outpacing income.
The value of whole life Insurance.
In contrast to term insurance, whole life was designed to provide life insurance coverage plus other “living benefits,” including guaranteed cash value accumulation as long as premiums are paid, eligibility to earn dividends,1 and the access to cash value via loans and partial surrenders.2
Here’s why whole life is often the best long-term solution:
- Whole life provides life-long insurance protection. Once you have been approved for coverage, your policy cannot be canceled by the carrier as long as premiums are paid when due. Regardless of your health, the insurance will remain in force.
- Whole life builds guaranteed cash value, provided premiums are paid. This amount can be used in the future for any purpose via a policy loan. For example, you can borrow cash value for a down payment on a home, to help pay for your children’s education, or to provide retirement income.2 The cash value can be increased by dividends when declared by the Company.1
We’ve prepared this table to help illustrate the differences between term and whole life insurance:
|Guaranteed term death benefit.||Guaranteed permanent death benefit.|
|Generally federal income-tax free death benefit.||Generally federal income-tax free death benefit.|
|Premiums are usually guaranteed only for the initial term.||Premiums are guaranteed to stay level for the life of the policy.|
|Potential additional growth of policy value through dividends.1|
|Inexpensive initially, with costs increasing at each renewal point.||Premiums are higher initially, but remain level, regardless of age, for life of policy.|
|You pay for pure death benefit protection for certain period, without cash value accumulation.||Offers tax-deferred cash value growth which is accessible through policy loans or partial surrenders.2|
|Term conversion privileges are available with most policies, enabling you to convert to a permanent policy that builds cash value, with no additional medical underwriting.3|
In Oregon, the policy form numbers are as follows: Yearly Convertible Term: 210-135.27; New York Life Insurance Company One Year Non-Renewable Term: 209-125.27; NYLIAC One Year Non-Renewable Term: 309-125.27; Level Premium Convertible Term: 210-60.27; New York Life Family Protection: 206-110.27; and Whole Life: ICC12213-50.
1Dividends are based on policy’s applicable dividend scale, which is neither guaranteed nor an estimate of future performance.
2Loans and partial surrender of any paid-up additions decrease the death benefit and cash value. Loans also accrue interest.
3Subject to terms and limitations.
This article is for informational purposes only. Please consult a New York Life agent for further details about the products mentioned and your specific situation and needs.