Life Cover: Term or Whole of Life?
Updated: Oct 21, 2019
As Financial Advisors, that's what we are here for: to give advice. The best advice when taking out a life insurance policy would be to take it out on a whole of life basis; which means to pay and have the cover for the rest of your life. This is the reason it is more expensive than Term assurance which is the product most sold by financial advisors when it comes to life insurance. It is where you pay the premium for a certain amount of years and then the cover stops and the payments stops.
The reasoning behind this is that it is the cheapest way of getting life cover and will keep you covered during the years where you are at your most vulnerable if something were to happen to you. You possibly have dependents that rely on you financially, you may have debts to cover or you may have very little savings to fall back on for funeral expenses etc. At the end of the term you can take out another policy for another term, and if you take out the Conversion option on the first policy you won't have to answer any medical questions for the next one, protecting yourself if you fall ill in between.
Another benefit of Whole of Life is that some plans will pay a cash value after a number of years so you can use it as a savings plan. It is the better investment of the two but again may not be an affordable option for everyone to commit to.
What Term should I choose?
A rule of thumb that advisors go on is to quote for cover until the youngest child is finished college, when they will hopefully start work full time and no longer be dependent on you. After that you can reduce the cover on a new policy as you may not need as much.