Battle Royale: Term Life Vs. Whole Life
The battle between term life and whole life insurance has been brewing for years. There are proponents for both sides. Let’s take a look at the differences between these two types of life insurance.
Term Life Insurance
The benefits associated with term life insurance are especially important for you as a member of the military. Let’s be honest, the career you’ve chosen, while truly honorable, is a risky one. The likelihood that you will be deployed and placed in harm’s way is high. You are willing to take that risk because you love this country, but not all insurance companies are willing to do the same for you.
So, what exactly is term life insurance? Term life insurance is just what it says in its name. It’s a life insurance policy that is valid for a predetermined amount of time — typically 10, 20, or 30 years. Term life policies do not earn interest. There are no commissions and fees taken out of your benefits. The amount you purchase is the amount of the death benefit. For this reason, it is generally much less expensive than other types of life insurance. With this type of policy, your rates will be the same until the end of the term even if you have changes in your health. If you pass away before your policy expires, the insurance company will pay the death benefit to your specified beneficiaries.
Not all insurance policies are created equal. It is important to review all the terms and conditions of any policy you are considering before you make the purchase. You should look for a term life policy that is geared specifically to military personnel. Make sure the policy you choose does not a have war clause, which would allow the insurance company to refuse payment if you are killed in action.
Some plans, like the Choice Level Term Policy offered to ASMBA members offer extra benefits that plans geared toward civilians may not including:
- A living benefit of up to 25% of your coverage amount - should you suffer a terminal illness or injury while you are still alive
- Guaranteed emergency death benefit of $5,000 - usually paid to your beneficiary within 24 hours of notification and verification of death
- Suspension of premium if you are deployed to a war zone and partial suspension of your family’s premiums if you are killed in combat
- Coverage continues regardless of changes in health even if you leave the service
- No medical exam for active duty military under the age of 50 for policies up to $250,000
Whole Life Insurance
We’ve explored the ins and outs of term life insurance policies, so let’s look at whole life policies. In general, whole life policies are substantially more expensive than term life policies. Why? There are two main reasons. First, whole life plans are marketed as being designed to last until you die no matter how many years that may be from the time you purchase the policy. This means the insurance company is taking on a greater risk that they’ll actually have to pay a death benefit. Second, whole life policies often have added investment components on top of the regular policy meaning that a portion of your premium is supposed to be set aside to accrue for later.
Investment components - that sounds good - you say? Well, not so fast. According to Tim Maurer of Forbes, the “investment feature in a permanent [whole] life policy is rarely as effective or efficient as several others, like your 401k, IRA or Roth IRA, so fill those buckets first. You should also not consider permanent [whole] life insurance until you have substantial emergency reserves, all revolving debt paid off, education fully funded and money in the bank for large future purchases. Permanent life insurance can be a valuable tool for a relative few, but unless you have income of over $250,000 annually or over $1 million in assets, your life insurance needs are likely best met with term life insurance.”
You work extremely hard for your money. You put your life on the line every day. Please don’t leave your family under insured. Give each other the peace of mind that comes with knowing you’ll both be financially secure if something were to happen.
There are many options available to you when searching for term life insurance, but reviewing the plans offered by military associations is the best place to start for several reasons. A military association will truly have your best interests at heart and will understand your needs better than anyone else. And, most military associations are governed by military personnel, so they understand what you’re going through because they’ve been there. Military associations generally aren’t bound by government red tape, so they are often better able to respond to members facing rapid deployment. And, lastly, because these associations know and relate to their members on a level most civilian organizations don’t, they make a conscious effort to seek out products and services that are the ‘best of the best’ — for our country’s elite military community.
There are many organizations and associations available to help members of the military during and after their service to the country. These associations not only encourage and spur camaraderie, they also offer incredible benefits for their members. Some provide advocacy, help you network and access job opportunities, tap into benefits at a reduced cost, lobby congress concerning issues vital to military life, or find support for you and your family. Feel free to join more than one! Whether you choose ASMBA (Armed Services Mutual Benefit Association), AFBA, USAA, USBA or another, you can be confident that membership in a military association will give you access to the very best for you and your family in times of war and peace.