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A term life insurance policy is the best option for most families. It’s affordable and is designed to provide financial security during a family provider’s peak earning years—or in the case of a stay-at-home parent, the years when the family relies on their everyday presence the most.

The ideal setup:

Term life insurance is inexpensive so as you are paying the premiums each month, you’re more than likely simultaneously contributing to your retirement accounts—such as 401(k)s or IRAs. If you die during these years, your family receives the death benefit payout from your policy. If you outlive the policy, you’re at (or close to) an age in which you can retire. At this point, your dependents are also likely not financially dependent on you any longer.

Example:

Anna is 30 years old. She’s an assistant account executive at an established advertising firm. She contributes 6% of every paycheck to her 401(k).

At 32, Anna gets married. She and her husband each purchase a $500,000 30-year term life insurance policy naming one another primary beneficiaries. Her premiums are $30 per month.

When Anna is 34, they have their first child.

At 35, Anna and her husband buy their first home. In this same year, she’s promoted to account executive and receives a raise. She also opens an IRA account and contributes $200 to it each month.

When Anna is 36, they have their second child.

At age 55, Anna and her husband are officially empty nesters.

At age 60, she and her husband send in their last mortgage payment.

At age 62, their term life insurance policies end.

At age 67, Anna retires.

» Compare: Term life insurance quotes

This is a simple example to show how term life insurance protects against the what-ifs in life. If Anna were to unexpectedly die any time between the ages of 32 and 62, her husband would receive a $500,000 check from the insurance company. This money could provide for a funeral and burial, in addition to paying off the mortgage and their children’s college tuition payments.

One strategy that works great if it’s affordable for you is to buy a term life insurance policy with enough coverage to protect your large expenses, such as the mortgage and children’s college tuition, and then purchase a small whole life insurance policy to supplement it.

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What About Whole Life Insurance?

Whole life insurance is not realistic for all families’ budgets. Whole life is about 10 times more expensive than term life insurance because it provides lifelong coverage and can accumulate cash value and pay dividends.

» Learn more: Term vs. Whole Life Insurance

However, one strategy that works great if it’s affordable for you is to buy a term life insurance policy with enough coverage to protect your large expenses, such as the mortgage and children’s college tuition, and then purchase a small whole life insurance policy to supplement it.

When you are in or near retirement age and your term life insurance policy expires, you will still have the whole life insurance coverage in place. Let’s go back to Anna’s example and add in a supplemental whole life insurance policy.

Example:

Anna is 30 years old. She’s an assistant account executive at an established advertising firm. She contributes 6% of every paycheck to her 401(k).

At 32, Anna gets married. She and her husband each purchase a $500,000 30-year term life insurance policy naming one another primary beneficiaries. Her premiums are $30 per month.

At 33, she and her husband also each purchase a $50,000 whole life insurance policy naming one another primary beneficiaries. Her premiums are $51 per month.

When Anna is 34, they have their first child.

At 35, Anna and her husband buy their first home. In this same year, she’s promoted to account executive and receives a raise. She also opens an IRA account and contributes $200 to it each month.

When Anna is 36, they have their second child.

At 53 years old, Anna’s $50,000 whole life insurance policy has a cash value of $12,221. If she desired, Anna could withdraw funds from this total via policy loans.

At age 55, Anna and her husband are officially empty nesters.

At age 60, she and her husband send in their last mortgage payment.

At age 62, their term life insurance policies end. Their whole life insurance policies are still active.

At age 67, Anna retires.

Chart illustrating supplemental whole life insurance with a term life insurance policy

Considering this example, if Anna died unexpectedly any time between the ages of 32 and 62, her husband would receive benefit checks of $500,000 and $50,000 (minus any policy loans and interest, if any).

If Anna outlived her term life insurance policy, her husband would receive the whole life insurance policy’s death benefit of $50,000 (minus any policy loans and interest, if any) whenever she died. If her husband dies before Anna or at the same time as Anna, the $50,000 would go to the contingent—or back up—beneficiary.

How Much Whole Life Insurance Would I Need?

If you’re looking to use whole life insurance as a supplement to your term life insurance, you really only need enough coverage to pay for your end-of-life expenses, such as your funeral, and you can choose to leave behind an inheritance if you wish.

If you’re more interested in whole life insurance than term life insurance, we advise you to contact us here at Quotacy. You can speak directly to an advisor to help you get settled on the best insurance plan for your needs.

Permanent life insurance is far more complex than term life insurance, so it’s best to speak to a financial advisor first. If you’re ready to get whole life insurance quotes, visit our whole life insurance page and get started by filling out the contact form.

How Do I Get Started on Buying Term Life Insurance?

Buying term life insurance is easy with Quotacy. If you aren’t sure how much you need, we have a free life insurance needs calculator that can point you in the right direction.

If you already have a good idea on how much term life insurance you need, head straight to our free quoting tool. You can see competitive term life insurance quotes online instantly without sharing your contact information. Once you find a policy you want to apply for, completing and submitting your online application takes less than five minutes.

At Quotacy, we’ve worked with thousands of families of every type to find the best possible coverage for their family’s goals. We can help you too.

Unsure of what type of life insurance makes sense for you? Talk to us! We’re here to get you the facts that you need to make an informed decision. Once you’ve made a decision, we’ll be your advocates and help you get the best possible coverage and keep you updated throughout the entire buying process.

» Learn more: Do I Need Permanent Life Insurance?

 

About the writer

Headshot of Natasha Cornelius, a life insurance writer, for Quotacy, Inc.

Natasha Cornelius

Writer, Editor, and Co-host of Quotacy's Q&A Fridays

Natasha is the content manager and editor for Quotacy. She has been in the life insurance industry since 2010 and has been making life insurance easier to understand with her writing since 2014. When not at work, she's probably studying and working toward her Chartered Life Underwriter (CLU) designation while throwing a tennis ball for her pitbull mix, Emmett, or curled up on her couch watching Netflix. If it’s football season, the Packers game will be on. Connect with her on LinkedIn.

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