Why Is Whole Life Insurance Bad?

The first step to finding the right policy for you is to decide which policy you want and what you need. 

Seems simple, right?

Unfortunately, your first instinct might be the wrong one. It is a common mistake of those around the age of 51 to believe they should switch from term life insurance to whole life insurance. 

Let’s review the differences between the two types of insurance: term life insurance provides coverage at a lower fixed payment for a limited period of time, ranging from 10 to 20 years; whole life insurance provides coverage at a fixed amount with a definite premium, which you pay out for your whole life. 

In this article, we are going to talk about the benefits of choosing term life insurance over whole life insurance. 

Term Vs Whole Life Insurance

Perhaps one of the strongest draws on term life insurance is that you will be paying less money, over a shorter time period for a relatively large policy. 

• The premiums in this policy are lower and they are more flexible than whole life
• The death benefit of this policy can be carefully calculated to meet specific financial obligations, such as debts or a mortgage. Or, alternatively, you can buy a bigger policy for more coverage (although we do not recommend this).
• Should you choose to convert your policy, you can always convert it to whole life, but you cannot convert back from whole life.  

Speaking of premiums for a term life policy, let’s take a look at what a healthy individual can expect to pay, at the age of 51, at a Preferred or Standard rate. (Please keep in mind that these rates may not necessarily reflect what you, personally, will be paying for insurance; rather, they should be used as a baseline to compare premium prices.) 

Life Insurance rates for a 51 year old Male Preferred Non-Smoker (with exam):

Face Amount 10 year 15 year _ 20 year

$250k $33 $43 $54

$500k $59 $80 $101

$750k $88 $117 $151

$1 million $107 $149 $194

Life Insurance rates for a 51 year old Male Standard Non-Smoker (with exam):

Face Amount 10 year 15 year 20 year

$250k $52 $67 $84

$500k $95 $126 $162

$750k $140 $188 $241

$1 million $180 $234 $309

Life Insurance rates for a 51 year old Female Preferred Non-Smoker (with exam):

Face Amount 10 year 15 year 20 year

$250k $26 $32 $41

$500k $47 $57 $75

$750k $71 $84 $109

$1 million $85 $107 $139

Life Insurance rates for a 51 year old Female Standard Non-Smoker (with exam):

Face Amount 10 year 15 year 20 year

$250k $39 $50 $63

$500k $73 $93 $121

$750k $106 $136 $178

$1 million $131 $173 $227

Whole life insurance doesn’t work in the same manner, although it does have it’s benefits, including: premiums that are locked-in for life, a policy that accrues cash value over time. You can access this policy at any time without penalties from the IRS and you can use this policy to pay any expenses that may occur in life.

The primary problem with this type of life insurance is that is does not provide financial certainty. You may be protected for your whole life; however, your premiums have very little flexibility. This means that your large up-front investment could pose a problem later down the road, should you encounter financial hardships. 

If you are thinking that you’ll be able to use your benefit to pay your premiums, you may have to think again; these premiums take time to accrue cash value, so you could still find yourself in a financial bind due to large premiums.

The Primary Reason People Choose Whole Life In Their Fifties

Perhaps the greatest fear people have when deciding between renewing a term policy and switching to whole life insurance is that they think they won’t be able to qualify for term life insurance once their term is up. 

Let us start by saying that this is rarely the case. 

It is possible to find an affordable term life insurance policy, even if you are in your 60s or 70s. In fact, companies like Voya will allow you to purchase a 25 year term life insurance policy up until the age of 55. This means that your policy could, realistically, last until you are 80 years old. 

Should you find yourself in need of coverage at the age of 80 or over, there are also options for that, simply seek the help of an agent. The best part? You will have saved hundreds in life insurance premiums just by sticking with term life insurance! This is especially huge as you reach retirement age, where you will find yourself spending more frugally. 

Should you fall ill or need high risk life insurance, there are companies who specialize in covering individuals with high risk diseases or conditions. 

We encourage you to use the help of an agent, and to compare death benefits and how much your premiums will be each month. 

Let Us Help

Life insurance options are as diverse as the individuals shopping for them, which means that there is no such thing as “one size fits all” in the life insurance industry. 

They can be customized to suit your needs, whatever they may be. In order to find the policy that will be right for you and your family, you should seek the expert help of a reputable independent life insurance agent. 

If you are considering converting your term life insurance policy to a whole life policy, you should always speak to both a life insurance agent and a trusted financial adviser.

Give us a call today and let us take the guesswork out of shopping for life insurance. No matter what your needs are, we can help you find the right company to protect you and your loved ones.