September 2021

Visit Borrower Portal ›

 Reminder About Your New DashboardRemember to check your inbox for an invitation for your new dashboard. If you haven’t already, be sure to log in and check out all the new features:

• Sign up for automatic payments
• Easily add or change your payment method 
• View past payments, upcoming payments, and account statements
• Add, view, and manage multiple loans

Don’t worry if you haven’t gotten your invitation yet—you will soon!  

 Your Financial News in Under 4 MinutesThis newsletter comes only once a month, but did you know you can get timely, entertaining financial news every week? Tune into the Weekly Roundup on YouTube for a three-and-a-half minute recap of relevant financial topics. We release new episodes every Friday, so be sure and subscribe! Watch Now ›

 Which type of life insurance is best, term or whole?Note: In honor of September’s National Life Insurance Awareness Month, we’re concluding this three-part series discussing life insurance, how much it costs, and which type might be best for you with helpful resource links from Haven Life Insurance Agency (Haven Life). Be sure to read Part 1 and Part 2 from the previous two newsletters first!

Which is better, term life insurance or whole life insurance?

You can’t spend ten minutes researching life insurance without seeing this question pop up. And believe it or not, it’s a hotly debated topic with plenty of strong opinions on both sides. Although it’s a big topic, by the end of this article, you should have enough information to be able to navigate whether term or whole life insurance is best—because it really depends on your situation.

So… term, whole, what’s the difference?
Term Life InsuranceWhole Life Insurance✓ Usually more affordable ✕ More expensive than term ✕ Provides coverage for a set amount of time ✓ Provides lifelong coverage ✓ Easy to understand ✕ More complicated than term ✕ Pays beneficiaries only if you die within the term ✓ Builds cash value, which can be borrowed against
Term Life Insurance
At this point in the series, you probably understand the basics of term life insurance: it covers someone for a predetermined term, like 10, 20, or 30 years, in exchange for premiums (payments to the insurance company). If the insured person passes away within that time frame, the beneficiaries get a tax-free check from the insurance company.

If the insured lives past the term, no check is cut and no premiums are returned. The insured person might be able to continue the existing term policy or buy a different one altogether—but since the insured person will be older, the premiums will be a lot more expensive.

That said, term life insurance is usually the most affordable type of life insurance, and it can provide coverage for loved ones during a time when they likely need that safety net the most.

Whole Life Insurance
Whole life insurance differs from term in four major ways:

Lifelong coverage
Most notably, whole life insurance is designed to provide coverage for (as the name implies) your whole life. That means that whether the insured person is 25 or 95 when they pass away, beneficiaries still have financial protection. That length of coverage makes whole life pretty alluring, as it’s more likely to pay out the insurance benefit to surviving loved ones.

Cash value component
Whole life is more than just life insurance: Part of the premiums for whole life insurance goes into something called cash value, which grows tax-deferred. Cash value builds up over time, and policyholders can eventually borrow from it without credit checks or any need to repay funds. Anything borrowed is generally tax free as well (although there are exceptions). Cash value can be a useful financial tool, providing extra funds in retirement or financing other projects.

Generally expensive
Here’s the “but.” Whole life insurance is expensive… Really expensive, compared to term. For the same coverage as a term policy, a whole life insurance policy could cost you anywhere from 5 to 15 times as much.¹

But there’s more: the cash value is entangled with the death benefit. Any funds borrowed from the cash value that aren’t repaid—including interest—get deducted from the death benefit. That means unpaid loans reduce what your loved ones get down the line.

Complicated
While the points above are all general components of whole life insurance, we can’t begin to cover all the details in this post. There is a lot of fine print you’d want to read before buying a policy such as: potential fees if you cancel the policy too early, when and how taxes might be imposed on your cash value, and even how the policy itself is structured. All of these complexities could require a financial advisor or a trusted agent to explain and purchase.

Which is best?
As tempting as whole life insurance can be, many people are probably better off buying term life insurance.

The number one reason is price—term is usually much more affordable. Considering that life insurance provides coverage only if you can pay the premiums over the life of the policy, affordability is one of the most important factors. (The last thing you’d want is to lose coverage because you couldn’t afford the premiums down the line.)

But what if you could afford the premiums for the coverage you need, would a whole life policy be worth it? That depends: if you’re trying to maximize your retirement savings, you might do better buying term, then putting as much as you can into tax-advantaged accounts like 401(k)s or IRAs. Once you’ve maximized your tax-sheltered retirement options, a permanent policy like whole life insurance could be a valuable option.

Beyond that, special circumstances could make whole life a better option if: 

• You care for a child or someone with disabilities who’d need a hired caretaker—regardless of how old you are when you die
• You’re a business owner or co-owner
• Your heirs could face estate tax after your passing

If these don’t apply to you, you might be best served by the old advice: “buy term and invest the rest.” But this is still a complex topic, and you might have some lingering questions about which is really best for you. We’ve partnered with Haven Life during this series, and their two products Haven Term and Haven Simple could be what you’re looking for—or you could check out their articles on life insurance for more information.

Footnotes
1. Policygenius, “Understanding whole life insurance quotes & rates,” June 21, 2021
As part of our affiliate partnership with Haven Life, we may receive compensation if you visit their site.

Haven Term is a Term Life Insurance Policy (ICC21 Haven Term in certain states, including NC) issued by C.M. Life Insurance Company (C.M. Life), Enfield, CT 06082. In New York (DTC-NY), California (DTC-CA), and other states it is issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001.

Haven Simple is a Simplified Issue Term Life Insurance Policy (ICC20 HAVEN SIMPLE in certain states, including NC) issued by C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.

Issuing the policy or paying its benefits depends on the applicant’s insurability, based on their answers to the health questions in the application, and their truthfulness.Privacy Policy| Unsubscribe

FreedomPlus, FreedomPlus.com, and the FreedomPlus logo are registered trademarks or service marks of Freedom Financial Asset Management, LLC, located at 2114 E Rio Salado Blvd, Tempe, AZ 85281

© 2013-2021 Freedom Financial Asset Management, LLC. All rights reserved.
This is a commercial email.

Loans are made by Cross River Bank, a New Jersey State Chartered Commercial Bank or MetaBank®, N.A., Members FDIC, Equal Housing Lenders.
Hyperlinks within this newsletter article will direct you to a third party website. The information presented within this email is for general informational and educational purposes only. Any information contained in this email is not intended, and should not be construed, as legal, investment or financial advice. Your review of this newsletter or use of information contained herein does not constitute or create any relationship between you and Freedom Financial Asset Management, LLC (“FFAM”), or any of its affiliates or partners, and you have sole responsibility for evaluating the information contained in this communication and any decisions you make based on such information. Although the material contained in this email was prepared based on information from public and private sources that FFAM believes to be reliable, no representation, warranty or undertaking, stated or implied, is given as to the accuracy of the information contained herein, and FFAM expressly disclaims any liability for the accuracy and completeness of information contained in this email and/or the associated hyperlinks. You should contact your attorney, financial advisor, accountant or other financial professional to obtain advice with respect to any particular issue or problem discussed herein.