Some people say “buy term and invest the rest”. How true is this? To put it simply, term insurance is pure insurance, without any cash value whereas whole life insurance accumulates a cash value.
Due to this, the term insurance premium per year is usually much lesser than whole life premiums for the same coverage amount.
Some clients like this lower premium of term plans, but others see whole life plans as a way of having the discipline of setting aside some money to create an asset for their later years.
A concern with term life policies is that it only covers you for a fixed number of years, typically ending by age 70.
A key benefit of a whole life plan is that it is a permanent life insurance policy. It is meant to provide you with a lifetime of protection and premiums are fixed, with the exception of Critical Illness premiums.
It does not expire after a specific number of years, and it cannot be canceled due to ill health.
Besides this, the guaranteed cash value accumulated in whole life plans can also attract a non-guaranteed gain based on financial market performance.
Some clients find this way of growing their money safer than investing it themselves.
In summary, “buy term and invest the rest” is only for those who are savvy in managing their own investments WHILE accepting the risk of being uninsured in their retirement years. For the rest of us, whole life plans make a lot of sense.
At the end of the day, your decision should be based on YOUR individual needs, preferences, and affordability.
If you have not done a review of your financial plan in the past year, now is the perfect time to do so!
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