Whole Life Insurance: Options For People In Their 40S

Life insurance is designed to pay out a death benefit to the person or persons you name as beneficiaries when you pass away. In exchange for this coverage, you pay a premium to the life insurance company. The older you are when you purchase a policy, the more expensive the premiums will be. This is because the cost of life insurance is based on actuarial life tables that assign a likelihood of dying while the policy is in force. Whole life insurance is permanent life insurance that provides coverage during your entire lifetime, meaning it will never expire. It is more expensive than term life insurance because people with a whole life policy are guaranteed to have a death benefit when they die. Term life insurance, on the other hand, offers level rates for a specific period, such as 20 or 30 years, and is cheaper than whole life insurance because it offers only coverage and not cash value. A person in their 40s can get whole life insurance, but it will be more expensive than if they were younger.

Whole life insurance vs term life insurance

Life insurance is a good idea at any age if people rely on your income. If you're in your 40s and considering a mid-life life insurance policy, there are plenty of options to choose from. The best type of insurance for you will depend on your budget, health, and goals.

Term Life Insurance

Term life insurance is a cheaper option that covers you for a set number of years, typically 10-30 years. It's a good choice if you only need coverage for a specific time, for example, until your children are grown up or your mortgage is paid off. The cost of term life insurance varies depending on age, gender, and medical history, but it usually has lower premiums.

Whole Life Insurance

Whole life insurance is a permanent form of insurance that covers you for your entire life. It tends to be more expensive than term life insurance because it serves as an investment. This investment, known as the cash value, grows tax-free over time. Whole life insurance is a good option if you want coverage that will last your entire life or if you want to maximize your financial potential.

Universal Life Insurance

Universal life insurance is a type of permanent life insurance that offers flexible premiums and death benefits. The cash value grows at a guaranteed interest rate, so you can expect predictable returns. Since universal life insurance allows you to adjust your coverage, you'll need to pay closer attention to your policy.

Group Life Insurance

Group life insurance is typically offered as an employee benefit and often comes with a fixed death benefit, such as one year's salary. It's free or low-cost and doesn't require a medical exam.

Burial Insurance

Burial insurance is a type of whole life insurance designed to cover funeral and end-of-life expenses, so the death benefit is typically capped at a low amount. These policies are often "graded," meaning you might have less coverage for the first two years. Burial insurance may be a good option if you have underlying medical conditions that would disqualify you from other types of coverage.

Factors influencing premium rates

Yes, a person in their 40s can get whole life insurance. Here are some factors that influence premium rates:

Age

The older you are, the more expensive the premiums will be. This is because the cost of life insurance is based on actuarial life tables that assign a likelihood of dying while the policy is in force. The older you are, the more likely you are to pass away while under coverage. Typically, the premium amount increases by about 8% to 10% for every year of age.

Gender

Women tend to live longer than men and, therefore, have lower rates. In Canada, for example, the average life expectancy is 82 years for men and 84 for women.

Health

The insurance company will look at your medical history. You can expect higher rates if you have a chronic or serious illness than someone who is in reasonably good health. It's important to get serious conditions like high cholesterol and diabetes managed before searching for coverage to ensure a competitive rate.

Smoking Status

Smoking puts you at a higher risk for many health problems. Life insurance companies charge more to insure smokers, and they may pay more than twice as much as non-smokers for comparable coverage.

Family Medical History

A family history of stroke, cancer, or other serious medical conditions may predispose you to these ailments and result in higher rates.

Lifestyle and Occupation

If you have high-risk hobbies such as racing cars, scuba diving, or rock climbing, you'll probably have to pay substantially more for insurance. Some companies also charge more if you work in an industry with a lot of occupational hazards, such as a police officer or a miner.

Pros and cons of whole life insurance

Whole life insurance is a permanent policy that offers lifelong coverage. This means that it will pay out to your loved ones no matter when you pass away. Here are some of the pros and cons of whole life insurance:

Pros

• Lifelong coverage: Whole life insurance can provide lifelong coverage, no matter how old you are when you pass away. Unlike with a term life insurance policy, there is no termination date.
• Locked-in premium rates: With a whole life insurance policy, your premiums—which are paid monthly, quarterly, semi-annually or annually—never increase. As long as premiums are paid, the policy will remain in force, even if your health worsens later in life.
• Cash value growth: A whole life insurance policy offers a cash value growth component. As your cash value increases, you can withdraw funds or borrow against them to help cover expenses or meet financial goals. Depending on the company you choose, whole life insurance may be eligible for dividends, which you can redeem for cash.
• Potential tax benefits for heirs: Whole life insurance can be a valuable estate planning tool. Since your death benefit is generally income tax-free, it can be used to cover the estate taxes of other assets you’ve left to loved ones or to equalize inheritances amongst beneficiaries.
• Possibility of dividends: Participating whole life insurance policies may earn dividends—the money an insurance company distributes to eligible clients when the company performs better financially than it expected for the year (though it’s never a guarantee). These dividends can enhance the policy’s overall value and offer potential returns on your investment.

Cons

• Higher premiums: Due to the lifelong coverage and cash value component, whole life insurance comes with higher premiums. It may be a challenge to cover them if you’re young or don’t have a lot of extra cash at your disposal.
• Lack of flexibility: Whole life insurance policies have limited flexibility compared to other life insurance products. Death benefit amounts and premiums can’t be changed, so it’s crucial to carefully review the terms and conditions before finalizing a whole life insurance contract.
• Slower growth than traditional investments: While your whole life insurance policy offers cash value accumulation, the growth rate may be lower than other traditional investments like stocks, bonds, mutual funds and real estate.
• Loans and withdrawals may impact benefits: A big benefit of a whole life insurance policy is the cash value accumulation and the ability to access those funds when needed. But there are some drawbacks to taking a loan against or withdrawing from the policy’s cash value, such as a decrease or elimination of the death benefit for your beneficiaries, a decrease in the cash surrender value that may cause your policy to lapse, and income tax liability if the contract terminates with outstanding debt.

How to get whole life insurance

Whole life insurance is a type of permanent life insurance that provides coverage for your entire life. It is more expensive than term life insurance because it guarantees a death benefit when you die, whereas term life insurance only offers coverage for a fixed period. Whole life insurance also has a cash value component that can be accessed while you are still alive.

• Choose a policy and insurance company: Compare policy quotes and insurance providers to select a whole life insurance plan that suits your coverage needs and budget. Consider factors such as the company's financial stability, customer satisfaction ratings, and the range of products offered.
• Fill out an application: Complete and submit an application for the whole life insurance policy of your choice, ensuring you provide all the necessary information.
• Take a medical exam: Depending on the policy and your age, you may be required to undergo a medical exam after submitting your application. This exam is similar to a regular doctor's appointment and can be conducted by a medical examiner at your home or office.
• Receive coverage: Once your application is approved and you have signed the necessary paperwork, you will be enrolled in the policy and can start paying premiums on your new whole life insurance plan.

• Whole life insurance rates increase with age, so it is advisable to purchase a policy as early as possible to lock in lower rates.
• Your health, lifestyle choices, and gender can also impact your premium rates. Maintaining a healthy lifestyle and refraining from smoking may help lower your premiums.
• Compare quotes from multiple insurance companies to find the most affordable option for your needs.

Whole life insurance alternatives

Whole life insurance is a type of permanent life insurance that offers lifelong coverage and builds cash value over time. While it can be a good option for those seeking lifelong coverage, there are several alternatives to consider. Here are some whole life insurance alternatives:

Term Life Insurance

Term life insurance is a more affordable alternative to whole life insurance. It offers coverage for a specific period, such as 10, 20, or 30 years, and the premiums remain fixed during this term. Term life insurance is ideal for those who want coverage for a certain period, such as until their children finish college or their mortgage is paid off. Additionally, term life insurance can be converted into a permanent policy if needed.

Universal Life Insurance

Universal life insurance is a type of permanent life insurance that provides flexible premiums and death benefits. It also offers a guaranteed interest rate on the cash value, resulting in predictable returns. However, it requires closer attention to the policy as adjustments may be needed over time.

Self-Funding

Self-funding involves creating a savings account for your family to use after your passing. While it offers flexibility, there is a risk of dipping into the funds, and it may not provide the same level of financial security as insurance.

Annuities

Annuities are savings accounts offered by life insurance companies. They can provide a lifetime stream of income for the policyholder and, upon their death, the remaining balance goes to their family. However, unlike life insurance, the payout is considered a taxable event.

Group Life Insurance

Group life insurance is typically offered as an employee benefit and provides coverage for a specific amount, such as one year's annual salary. It tends to have level premiums for all members, regardless of age, gender, or health, but the coverage may be limited and is usually not portable if you leave the company.

Burial Insurance

Burial insurance, also known as final expense insurance, is a type of whole life insurance designed to cover funeral and end-of-life expenses. It often has lower coverage amounts and may be graded, providing reduced coverage during the initial years of the policy. This alternative may be suitable for those with medical conditions that would otherwise disqualify them from other types of coverage.

Frequently asked questions