Should you have Whole Life insurance AND Term insurance?
“Whole Life!” “Buy Term!” “Whole Life!” “Buy Term!”
These are the war cries from insurance experts and financial entertainers, who often fight over what is better, whole life or term life. Kinda reminds me of the old Miller Light commercials:
“Tastes Great!” “Less Filling!” “Tastes Great!” “Less Filling!”
Just like the Miller Light slogan, when it comes to life insurance, BOTH options can be good to have.
As a life insurance expert myself, I’ll admit that I have Whole Life AND Term Life insurance. And lots of both!
Here’s why:
Whole life insurance – for the obvious reasons of utilizing the Infinite Banking Concept (aka dividend-paying high cash value life insurance) and for having a death benefit that is guaranteed to be around when I’m not, no matter how old I live to be (I could discuss whole life ad nauseum but this Monthly Morsel is about term life).
Term insurance – to supplement my whole life insurance in order to max-out my “Human Life Value” (HLV). Let’s quickly explain what I mean by HLV…
Did you know your life actually has a “price tag”? According to actuarial scientists employed by life insurance companies, every person has an economic value (aka HLV) based on that person’s earning potential or assets. This is how life insurance companies determine how much insurance a person can qualify for. And they won’t allow you to be insured over your HLV.
It’s kinda like your car. If you drive a 2012 Toyota Camry, the insurance company will not insure your car for $150,000 even if you are willing to pay the premium it would cost. Why? Because the car doesn’t have $150,000 worth of value!
Make sense?
A lot of people would like to max out their HLV through whole life insurance alone, which is a great plan. But that can be difficult to do right away, financially. So Term insurance can help fill the gap until you can transition all of your insurance needs to Whole Life.
But DON’T get just any old Term insurance. You NEED to get CONVERTIBLE TERM.
Here’s 2 major reasons why:
- It “locks in” your insurability
A Convertible Term insurance policy gives the insured the option to convert the Term policy to a Permanent (Whole Life) policy at any point during the term WITHOUT proving insurability.
What this means is that if you get a 20 year Convertible Term policy today, you are locking in your health today for the next 20 years. And that’s a good thing because we typically don’t become healthier as we get older.
As an example, let’s say 18 years from now you get cancer or become severely disabled and end up being uninsurable. Well, because you purchased a 20 year Convertible Term policy, the company has guaranteed you the contractual right to convert SOME or ALL of the term insurance to a permanent policy as if you were as healthy as the day you started the policy!
- It’s a great option if you want Whole Life insurance (properly structured, of course) in the future but can’t pay the higher premiums right now
If you’re reading this email then you should be familiar with the Infinite Banking Concept, in which you use properly-structured Whole Life insurance to create your own banking system. Many people want to do this but just aren’t in a position to be able to fund the larger premiums just yet. So instead, they make the smart decision to get a Convertible Term policy that they plan to easily convert to a Whole Life policy down the road when they are financially ready.
And in the meantime they have put in place low-cost life insurance for themselves and their loved ones, locked in their good health today for the next 10/20/30 years, and started their plan to eventually become their own bankers by converting their term insurance to a whole life policy!
If you wish to look into this option for yourself and get a no-obligation quote on a Convertible Term policy, feel welcome to schedule some time to talk with me.
Cheers,
David Befort
Host of the Wealth Warehouse podcast
