Getting Covered: The types, benefits and drawbacks of life insurance

Getting Covered: The types, benefits and drawbacks of life insurance

Here’s the problem. Once you start talking about life insurance, people’s eyes glaze over, they stop paying attention and go on to something interesting. In a nutshell, unless you are thinking about it, now, life insurance is dull.

Yes, we all want to take care of our families and loved ones. Yes, we all know how hard it can be for the ones we leave behind to take care of the details of death. But, when you get right down to it, life insurance is neither something we want to think about or something we want to resolve.

Like buying a grave plot or cremation plan, life insurance is an admission of our own mortality and no one really wants to think about their own death. Of course, we can leave it to our grieving families but that is short-sighted and selfish.

Taking a few hours, now, to make it easier on your family, during their grief, is the decent thing to do.

The two types of life insurance

All life insurance policies can be broken down into two broad categories. The first is whole life, a policy that remains in effect if the premiums are paid, while the second is term life, which only runs for a specific length of time before it must be renewed.

Under these two categories, insurance policies can be broken down, but that is beyond the intent of this article. We are going to concentrate on term and whole life insurance.

Whole life insurance

Whole life insurance is, in most cases, the better of the two types of policies. Whole life, once a policy is written, can never be cancelled, never have the rates go up and can be used as collateral once the policy has matured. It has several advantages over term life insurance and one big disadvantage.

  • Whole life insurance policies are written for the life of the recipient. It doesn’t matter whether they are 2-years old or 92-years old, the policy will stay in effect for their entire life if the premiums are paid.
  • Once the policy has matured, it can be used as collateral for loans or money can be voluntarily taken out of the policy, reducing its overall value, to take care of pressing needs or wants.
  • Whole life policies are more expensive than term life.

Life insurance protection

Term life insurance

Term life policies are less expensive than whole life, but they have several disadvantages compared to whole life policies. They cannot be used for collateral, death benefits for the family are the only benefits they offer and your health can be a major factor in the cost of term life.

  • Term life policies only run for a specific length of time before they must be renewed or upgraded. During the renewal process, your health can have a significant impact on the cost of term life insurance. In some cases, your health might even prevent you from being able to get a policy.
  • Other than death benefits, there are no other reasons to get term life. You can never use it as collateral and the policy never has an acquired value.
  • Overall, however, term life insurance is less expensive than whole life and can be used to fill any shortfalls in your insurance coverage when whole life could be too expensive to get or difficult to maintain. For example, when you are raising your own family. Whole life for multiple children and adults could be too expensive.


The key to getting the right insurance for your specific situation is understanding the different types of insurance, their benefits and their negative aspects. Each of the broad categories of insurance contain several types of specific coverage plans. Choosing one type does not preclude you from the other.

Consult with your trusted financial advisor or insurance consultant for the best insurance policies for you.

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