No one knows precisely when they’ll pass away, but death is one of the few sure things in life. Life insurance helps people prepare for this event, giving them a way to provide for their loved ones after they’re gone. Because death is so sure and most everyone has loved ones, this is one type of insurance that most people in Massachusetts should consider getting.
Life insurance, in its most basic form, gives death benefits to survivors of deceased individuals. When a policyholder passes away, their policy’s benefits are generally distributed to the beneficiaries they’ve designated. The beneficiaries may use the benefits for just about anything, but some common uses include:
In addition to providing death benefits, some life policies also offer investment options and retirement plans. These aren’t included in all life policies, though.
Term life policies and whole life policies differ in several significant ways.
First, whole life policies are designed to last longer than term policies. Term life policies are in effect for a set amount of time, which is agreed upon when the policy is purchased. Common time frames include 10, 20, and 30 years, although a policy could theoretically be written for any duration of time. Whole life policies, in contrast, are meant to last for a person’s entire life.
Second, whole life policies usually offer investment options along with death benefits. Term life policies generally only offer death benefits.
Finally, the premium structure for whole life and term life policies tends to be different. Term life policies frequently (although not always) have fixed premiums that don’t change. In comparison, whole life policies’ premiums tend to increase over time, often becoming much larger than term policies’ premiums.
The higher premiums of whole life policies, however, can be offset by the investment options they provide. Eventually, the earnings from a whole life policy’s investments may become greater than the premiums -- at which point the premiums can essentially be paid using only the policy’s investment income.
Term and whole life policies both have their uses. Which one is better for a Massachusetts resident depends on their situation and financial goals.
People who want to make sure their families will be provided for if they pass away unexpectedly may want to consider a term policy. The lower premiums make these policies affordable while raising a family, and they can provide death benefits if a parent is no longer able to financially provide. Once the policy expires, children will hopefully be grown and on their own, and a policyholder’s spouse should have a retirement account they can draw funds from if they need to. Thus, there shouldn’t be a large need for life insurance after a term policy expires, because loved ones will either be self-sufficient or have savings.
Whole life policies can be good options for people who want death benefits for their loved ones and are looking for an investment vehicle. Many people who purchase whole life policies appreciate the convenience they offer and the many investment opportunities they make available.
Whole life policies may also be a wise choice for people who provide for a handicapped individual. Parents who have a disabled child, for instance, may want to purchase a whole life policy so that they know their child will have death benefits to provide for the services they need regardless of when the parents pass away. With a term policy, the child may only have death benefits to help them if a parent passes away during the term policy’s effective period.
For help weighing the benefits of term and whole life coverage, Massachusetts residents should contact an independent insurance agent near them. An agent will be able to help explain how each type of life insurance might help in a specific situation, and the agent can get quotes for policies.