Life is always changing – which is why it’s important to review your insurance needs and make sure your coverage is keeping up with your life. Whether you’re entering adulthood or nearing retirement, you may have a need for life insurance… but understanding which policy is best for you can be confusing. Let’s talk term and whole-life insurance to help you find which benefits you the most, at any stage of life.
Term Life Insurance
Term life insurance provides coverage for a specific number of years, and you select the “term”. It’s an easy, more affordable option if you’re not looking for lifelong coverage. But, if you should change your mind, during your policy term you usually have the option to renew it or perhaps convert it into a permanent life plan.
Some general things to know about term life insurance:
- You have the option of choosing how long and how much.
- Plans usually come in 5-, 10-, 15-, 20-, 30- or 40-year packages.
- It is often more affordable than other life insurance options.
- Some policies come with an option to convert to permanent.
- It only pays if you perish during the period of the policy.
When would I need term life insurance?
In your 20s: There are reasons to consider life insurance protection at a young age. Your rates will be less expensive because insurers price policies based on risk, and young people have a far lower mortality rate than older groups. College and credit card debt could be one expense you want to cover. According to Debt.org, the average student debt is over $37,000. A term policy can help relieve the burden of college loan payments away from your co-signer or family.
In your 30s and 40s: A new house, spouse, and growing family are just a few reasons to consider a term life policy. While the best approach is often a blend of term and whole-life insurance – that provides lifelong coverage and builds cash value – term policies can help cover the basic expenses if the unexpected does occur.
Whether you’re a fresh-out-of-college grad, a homeowner, newly married, or just had your first child, here are a few reasons why you might need a term life policy:
- Funeral costs – From funeral planning to cemetery arrangements and proper permits, a funeral can cost up to $7,848. A term life insurance plan helps cover those costs so your family and loved ones don’t have to.
- Income protection – Consider how much money your family would need without your paycheck in the picture. A term policy can help cover rent, utilities, groceries, car payments, or childcare expenses so your family can maintain their lifestyle to the comfort they are used to.
- Mortgage protection – Having life insurance in place can allow your family’s story to continue in the home they know and love.
- Child starter plan – Purchasing life insurance when your children are young means they’ll be able to have life insurance when they need it most – even if there are health problems that run in your family. Once in place, their rate won’t go up, and they’ll also have the option to exchange their term policy for a permanent cash value policy later in life.
Whole-Life Insurance
Whole-life insurance, also called permanent life insurance, is designed to last your lifetime. That means your family and beneficiaries are covered for the duration of your life. In addition to providing financial protection, whole-life policies build cash value, which allows you an opportunity to build your wealth.
Some things to know about whole life insurance:
- Provides coverage for your entire life
- Accumulates cash value
- Premiums and coverage are guaranteed to remain the same for your lifetime
When would I need whole-life insurance?
In your 30s and 40s: While a term life plan can be a great place to start for life insurance protection, the best approach is often a blend of term and permanent life insurance that provides lifelong coverage and builds cash value. Whole-life insurance can be used to cover the same expenses as a term – like funeral costs, income replacement, and mortgage protection, for example. Your local agent can guide you in deciding when to choose whole life instead of term and how much to purchase.
50s and up: At this stage of life, you may have entered the “sandwich generation” meaning you might care for elderly parents while financially supporting college students or young-adult children. Inadequate protection could put both groups of family members at risk. At the same time, retirement savings might not stretch as far as expected after factoring in taxes, inflation, and less-than-stellar investment returns. With a whole-life policy you can borrow against your policy cash value as well as use it to supplement your income during your retirement years. Talk to one of our agents about how whole-life fits into your overall financial plan.
No better time than now: Learn more about the life coverage that fits best with your life by talking with a professional, like one of our agents. Together, you can find the policy that provides peace of mind and the perfect protection for you, and your family.
This story was originally published in 2018. It has been updated with new information.
ERIE® insurance products and services are provided by one or more of the following insurers: Erie Insurance Exchange, Erie Insurance Company, Erie Insurance Property & Casualty Company, Flagship City Insurance Company and Erie Family Life Insurance Company (home offices: Erie, Pennsylvania) or Erie Insurance Company of New York (home office: Rochester, New York). The companies within the Erie Insurance Group are not licensed to operate in all states. Refer to the company licensure and states of operation information.
The insurance products and rates, if applicable, described in this blog are in effect as of January 2024 and may be changed at any time.
Insurance products are subject to terms, conditions and exclusions not described in this blog. The policy contains the specific details of the coverages, terms, conditions and exclusions.
The insurance products and services described in this blog are not offered in all states. ERIE life insurance and annuity products are not available in New York. ERIE Medicare supplement products are not available in the District of Columbia or New York. ERIE long term care products are not available in the District of Columbia and New York.
Eligibility will be determined at the time of application based upon applicable underwriting guidelines and rules in effect at that time.
Your ERIE agent can offer you practical guidance and answer questions you may have before you buy.
