When it comes to life insurance, different types of coverage can serve different needs.
After breaking down term life insurance in a previous conversation, Kiruba Eswaran, CEO of Eleos Life, returned to We Are Austin to chat with Sierra Waggoner and explain whole life insurance and how it differs.
After breaking down term life insurance in a previous conversation, Kiruba Eswaran, CEO of Eleos Life, returned to We Are Austin to chat with Sierra Waggoner and explain whole life insurance and how it differs.
“So whole life is a life insurance product that lasts your whole life,” Eswaran explained.
How does whole life insurance work?
Like term life insurance, whole life allows someone to select a coverage amount. One of the biggest differences is that a whole life policy can also build cash value over time.
“The cover always lasts your whole life, and a cash value starts building up inside,” Eswaran said.
That cash value can eventually provide options while the policyholder is still alive.
“The most common is you can borrow against it,” Eswaran said, explaining that the cash value is generally limited during the first few years but can grow over time.
Another option may be surrendering the policy and taking the available cash value, though Eswaran noted taxes and additional charges can apply.
How is it different from a funeral home plan?
Eswaran also explained that whole life insurance is not the same as a plan someone may purchase directly through a funeral home.
“Whole life insurance, or life insurance as a whole, pays the beneficiaries that amount,” he said. “So it’s really up to them to decide what they want to do with the money.”
A pre-need plan through a funeral home, on the other hand, generally covers a specific set of funeral goods and services.
Eswaran recommends understanding exactly what is included and asking about portability, including what happens if you move to another state or the funeral home goes out of business.
What if you can’t keep paying?
Financial circumstances can change, and Eswaran said insurance policies generally provide a grace period rather than immediately canceling coverage after a missed payment.
“It’s not like you don’t pay and they immediately cancel your policy,” he said, adding that the grace period is usually around 30 days.
Depending on the policy, other options may include surrendering the policy for its available cash value or using the accumulated value toward a smaller amount of coverage.
Term life or whole life?
Eswaran said consumers don’t necessarily have to choose one or the other because the two products can serve different purposes.
“They have a different role to play,” he said.
Term life can help cover financial obligations that eventually end, such as a mortgage. Whole life can help address needs that may remain throughout someone’s lifetime, including funeral expenses or leaving something behind for loved ones.
Cost is another major difference.
“One thing you have to remember is that whole life is an expensive product,” Eswaran said.
For some people, the answer may be a combination of both.
“You can have a lot of term life, a little bit of whole life to cover those things that you want,” Eswaran said.
For more information about Eleos Life and its life insurance options, visit EleosLife.com.
For more information about Eleos Life and its life insurance options, visit EleosLife.com.