If you can’t afford whole life insurance

Photo: denna/morguefile.com 

Q. I can’t really afford whole life insurance, but I need coverage. I have a smaller term policy. Are there options I’m not thinking of for my family? I’m 42 and I have a wife and two kids.
— Feeling uncovered

A. Getting good coverage that you can afford is the most important issue here.

Term is the simplest and most cost-effective type of life insurance, said Jody D’Agostini, a certified financial planner with AXA Advisors/The Falcon Financial Group in Morristown.

Term would pay the death benefit of the policy only for the term originally taken out, which is usually from ten to thirty years, she said.

Most term policies have no other benefit or cash value provisions — just the death benefit.

“They can be level term, which keeps the same premium for the length of the term, or decreasing term, where the death benefit decreases over the life of the term,” D’Agostini said. “When the term is over, the policy is terminated.”

She recommends you get the coverage needed to replace current income that would be lost, and enough to cover debts such as mortgage or college expenses and to cover final expenses.

D’Agostini said some policies allow for conversion to permanent policies such as whole life before the term is over. You would now pay the premium for your current age, but the death benefit would continue, she said.

So when you start with an inexpensive term policy from a solid company, you should make sure the company has good permanent policies that you can convert to over time, said Jerry Lynch, a certified financial planner with JFL Consulting in Boonton.

“I am a big fan of whole life insurance but not if it reduces the total death benefit that you are getting,” Lynch said.

If you choose to convert the policy, the conversion wouldn’t require underwriting again, D’Agostini said.

“Whole life gives lifetime coverage, and provides guaranteed cash value with a fixed premium,” she said. “The premium would probably be higher for this policy.”

But before you make a final decision, we’re wondering if you’ve gotten quotes for permanent life policies. Depending on the carrier, your health and other factors, you might be surprised at the pricing. Make sure you get some quotes before you discount permanent policies altogether.

Email your questions to moc.p1591003581leHye1591003581noMJN1591003581@ksA1591003581.

This story was first posted in December 2015.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.