Life insurance is one of the most important tools we have to protect our family and our assets in the event of our passing. We all hope to live forever. But, at any moment, no matter how young or healthy we are, we may find that tragedy strikes and you need to make sure your family is protected.
As we all know here in Houston, you never know what tomorrow brings.
Everyone, of any age, should have at least term life insurance. Term life insurance is a temporary life insurance policy that lasts typically about 20 years (though the length of the term can vary). When you are young, and your odds of passing are low, this type of life insurance is typically very inexpensive. While exact numbers will depend on a variety of factors, young people are sometimes able to obtain as much as $500,000 for as little as $40 per month, sometimes less.
As you get older, however, the costs can increase because the odds of passing increase. The older you are, the more likely you are to have health issues, for example. As a result, if you have term life insurance, and it expires, getting term life insurance again may be more expensive – sometimes significantly so.
Imagine you are 20 and have life insurance for $250,000 at $40 per month [please note this is only an example, actual numbers vary]. Then, it expires at 40, and you get it again for $70 per month. Then, it expires at 60. At this point, it may be as much as $350 or more per month. Already, that can eat a chunk of your monthly budget, especially if you are on a fixed income. If you live past the age of 80, chances are the cost of term life will be so expensive, you may not even want to get it at all – and that is if insurance carriers will take you, which they may not since you might be considered a much higher risk.
So, while term life insurance is very valuable and highly affordable, it comes with one downside: it expires, and getting it renewed can become prohibitively expensive – if the carriers will allow you to obtain insurance at all.
So what can you do?
One option that can be a great choice if your budget allows it is to look into “limited pay whole life insurance.” Limited pay whole life insurance is a type of permanent life insurance – meaning, you can have it forever, usually without any change in premium.
What makes this type of life insurance special is that, after a set period of time, you will no longer have to pay any premiums. Typically, you pay your life insurance for 10, 15, or 20 years (the exact length of time will be determined by you, the carrier, and Kaia Insurance Group), and then once that term is over, you will still maintain your life insurance for life – you just won’t need to pay for it anymore.
Benefits of Limited Pay Insurance
This type of life insurance has so many advantages, especially for us here in Texas. We know how expensive life insurance can get here in Houston, and how many families do not have a lot of retirement available to spend on monthly premium payments. If you’re still younger, and you have a bit of money from your work, you may want to consider limited pay whole life insurance, with benefits such as:
- Lifetime Coverage – Easily the best value that this type of life insurance brings is that you have lifetime coverage with a fixed premium (or, eventually, no premium). You won’t have to worry about the cost increasing as you get older, nor will you have to worry about renewing at a potentially higher cost.
- Financial Certainty – By completing premium payments within a set period, policyholders can enjoy financial certainty and better budget planning. This is particularly beneficial for individuals who want to ensure their insurance premiums are paid off before retirement or other significant life events.
- Estate Planning – Limited pay whole life insurance is an effective tool for estate planning and wealth transfer. The death benefit can provide financial support to beneficiaries, cover estate taxes, or fund a trust. Because it does not expire and does not require premium payments, you can feel confident that you’ll be able to have your beneficiaries covered no matter your financial situation. Many people choose to obtain whole life insurance specifically to help with estate planning, as it usually provides a tax-free payout to beneficiaries.
- Cash Value Accumulation – Limited pay whole life insurance policies accumulate cash value, which grows on a tax-deferred basis. This cash value can be accessed through policy loans or withdrawals, providing a source of funds for emergencies, retirement, or other financial needs.
- Protection Against Health Challenges – Chronic health conditions, especially those that are not terminal, can still cause new life insurance policy premiums to skyrocket. But because whole life is a permanent life insurance with a fixed premium, followed by a limited term in which the policy becomes permanent with no premium, future medical exams are typically irrelevant.
This type of life insurance can also have other benefits such as tax advantages, and can be used in some cases as a retirement vehicle depending on the policy.
There are situations in which whole life insurance can be useful for someone at almost any age. But it is *especially* worth considering if you are younger, where the typical risk is low. This allows you to pay premiums while you’re still working, and – depending on your financial situation – make it possible to stop worrying about life insurance in the future.
What Are Reasons NOT To Consider Limited Pay Whole Life Insurance?
With these benefits in mind, there are some situations in which this type of insurance is not ideal. First, the premiums are more expensive – this can, depending on your financial situation, make it so that you cannot acquire as much insurance coverage as you would have previously.
For example, if you would have obtained $500,000 in term life insurance, the premium for that in whole life can be significantly higher. Those on a tighter budget may end up choosing a smaller number, like $100,000 in coverage, to help make payments more affordable. Keep in mind, however, that you can offset this by also obtaining term life insurance while you’re younger, and then – when the kids are in college and your financial needs decrease – not renewing the term life insurance when you’re older.
Strategic Financial Planning
Limited pay whole life insurance offers a unique combination of lifetime coverage, cash value accumulation, and fixed premium payments over a specified period. It is particularly advantageous for those looking to secure long-term financial protection, enhance estate planning, and ensure financial predictability at a younger age. But to determine if this type of insurance coverage is right for you, it is important to speak with a specialist. Contact Kaia Insurance Group today in Texas to learn more about limited pay whole life and determine if this is a coverage option you should consider.
