Can You Have Both Term and Whole Life Insurance?

Can You Have Both Term and Whole Life Insurance?

You can have both term and whole life insurance. Many advisors recommend having both policies to cover all your bases and help handle the fluctuations that exist in day-to-day life.

To understand why this is recommended you should understand the differences between term and whole life insurance, as well as the benefits of having both. We will look at these topics, along with any limitations this has, below.

What is Term Life Insurance?

Term life insurance policies allow you to purchase a policy at a lower premium, but they have an expiration date. Whether you purchase one to extend one year, 5 years, or even 40 years, the moment the policy ends you lose the death benefit.

Term life insurance is a good choice for individuals with limited income who would still benefit from life insurance, such as single parents or those with sizable debt (like a mortgage). Term life insurance is also much easier to understand, so it can be a simpler process to get started.

What Is Whole Life Insurance?

Whole life insurance policies are a form of permanent life insurance. They have a set premium that is often 5 to 15 times more expensive than that of term life insurance, but there are plenty of advantages to whole life insurance plans.

These policies do not expire as long as you keep up on the payments, and you have some leeway there after reaching a certain cash value. The cash value can also be used to borrow from for other expenses, including college tuition or emergency repairs.

Whole life insurance premiums are also put into accounts to gain interest, adding to that cash value over time.

Benefits of Having Both Term and Whole Life Insurance

Not only can you have both term and whole life insurance, but there are plenty of reasons to do this. Many individuals mix their plans to meet their needs, and you can even have multiple of each if you see fit.

The main reasons that policyholders both types include:

  • Lower rates for better coverage
  • Adding on to existing employer-offered plans
  • Changes to their family or living situation
  • Greater financial coverage
  • Risk mitigation

These lead to a variety of benefits.

Improved Coverage at a Lower Rate

You can take advantage of the benefits of both plans to improve your life insurance value to cover your situation as it is needed.

A term life insurance policy can build on top of a whole life insurance policy to cover shorter-term costs without increasing your premium by much. If you want to add a policy to extend until your child reaches adulthood and can pay for their own expenses it would be cheaper to set a term to that date than it would be to adjust a whole life policy.

This also means that after that time has passed you can continue with the whole life policy without needing to readjust or pay any termination fees.

Supplementing Group Life Insurance Coverages

Group life insurance covers nowhere near as much as is recommended for a life insurance policy. These policies have some value, but when they can drop as low as a $50,000 death benefit then you should be looking for additional coverage.

If price is an issue then you can go with term coverage to round out this number, or you can secure a whole life plan to get the job done.

Either way, having a plan outside of what is offered by an employer will also prevent any lapses in coverage if you leave your job.

Adapting to Life Changes

There may be certain periods when it makes sense to bring on additional life insurance policies.

If these are term periods, like raising a child, then purchasing an additional term life insurance policy can boost what is paid out in the unfortunate incident of a death. This supplementary policy ensures that the new addition does not add any extra weight to the original.

Many policyholders start by purchasing term life insurance because it is all they can afford at the time, but as they end up in a better financial position in life they move to purchase more extensive whole life policies.

Covering Additional Expenses

Purchasing an additional policy can help mitigate expenses such as:

  • Loans
  • Mortgages
  • College tuition

With debt, you can purchase a term life policy with a benefit the size of the debt that extends over your repayment period. This ensures that if you die then your heirs are not burdened and have less to handle.

Because a whole life insurance policy has a cash value, even a small policy can be beneficial in covering expenses like tuition or emergency expenses. If you get started early on with a small policy then you can use it to your advantage in the future.

Variating Your Investments

Many policyholders simply are not comfortable putting all their eggs in one basket and purchasing different forms of coverage eases stress in that area.

This can be from the same company or multiple companies, but employing a variety of policies can fill in gaps that you were not even aware of.

Limitations of Having Both Term and Whole Life Insurance

There are not many limitations to having both term and whole life insurance that come from the companies that offer them, but you should know what limits you need to set when shopping around.

Make sure that the policies you purchase cover your needs. This should be a reasonable amount that you can easily afford. Anything more than 20 or 30 times your current income can raise a red flag and interfere with your ability to purchase.

Get Help Choosing Multiple Policies that Work For You

The easiest way to create the correct mix of term and whole life insurance policies for your needs is to contact a life insurance agent like Sim Gakhar who has endless experience in this area. Not only will you save time and money, but you will end up with policies that are perfect for your situation.

 

FAQs & Helpful Resources Regarding Whole Life Insurance