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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.<\/p>\n
\u201cSo whole life is a life insurance product that lasts your whole life,\u201d Eswaran explained.<\/p>\n
How does whole life insurance work?<\/p>\n
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.<\/p>\n
\u201cThe cover always lasts your whole life, and a cash value starts building up inside,\u201d Eswaran said.<\/p>\n
That cash value can eventually provide options while the policyholder is still alive.<\/p>\n
\u201cThe most common is you can borrow against it,\u201d Eswaran said, explaining that the cash value is generally limited during the first few years but can grow over time.<\/p>\n
Another option may be surrendering the policy and taking the available cash value, though Eswaran noted taxes and additional charges can apply.<\/p>\n
How is it different from a funeral home plan?<\/p>\n
Eswaran also explained that whole life insurance is not the same as a plan someone may purchase directly through a funeral home.<\/p>\n
\u201cWhole life insurance, or life insurance as a whole, pays the beneficiaries that amount,\u201d he said. \u201cSo it\u2019s really up to them to decide what they want to do with the money.\u201d<\/p>\n
A pre-need plan through a funeral home, on the other hand, generally covers a specific set of funeral goods and services.<\/p>\n
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.<\/p>\n
What if you can\u2019t keep paying?<\/p>\n
Financial circumstances can change, and Eswaran said insurance policies generally provide a grace period rather than immediately canceling coverage after a missed payment.<\/p>\n
\u201cIt\u2019s not like you don\u2019t pay and they immediately cancel your policy,\u201d he said, adding that the grace period is usually around 30 days.<\/p>\n
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.<\/p>\n
Term life or whole life?<\/p>\n
Eswaran said consumers don\u2019t necessarily have to choose one or the other because the two products can serve different purposes.<\/p>\n
\u201cThey have a different role to play,\u201d he said.<\/p>\n
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\u2019s lifetime, including funeral expenses or leaving something behind for loved ones.<\/p>\n
Cost is another major difference.<\/p>\n
\u201cOne thing you have to remember is that whole life is an expensive product,\u201d Eswaran said.<\/p>\n
For some people, the answer may be a combination of both.<\/p>\n
\u201cYou can have a lot of term life, a little bit of whole life to cover those things that you want,\u201d Eswaran said.<\/p>\n
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