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What’s the difference between whole life and term?

Benefits: Whole life policies have a living benefit and a tax-sheltered cash account that builds up inside. Clients don’t pay taxes on the gain each year, and that money can be used in retirement to supplement retirement planning. No such benefit is available with term insurance. Term insurance only has the actual life insurance coverage; there is nothing but a death benefit. In order for the benefit to be paid, somebody has to pass.

Buyers can also add riders to whole life policies, such as accelerated benefits riders, which enable someone who has a terminal illness to be able to access as much as two-thirds of the benefits while still alive. This is something that can’t be done with term insurance.

Longevity: Term life policies are sometimes referred to as temporary life. There is a fixed period of time when the premium is level, but after that time, either the premium increases yearly to the point where it becomes unaffordable or the policy terminates. The premium can eventually get so high that people have to terminate it, so the product may not be around at the very time it is needed — death.

Whole life, on the other hand, has a level premium. Theoretically, this policy can be around forever because the policy premium is never going to increase. If people can afford the first-year premium, they typically can afford it in the future. It’s similar to a mortgage payment — the first is always the worst, but people get used to it eventually.

Dividends: A whole life product has dividends, and the dividends are paid out much like they would be to a stockholder of a company. Those dividends can be used to reduce the premium, or they can be used to build up the cash inside the policy and the face amount. Term life insurance has little or no dividends.

The trouble with term

Today, if a prospect is young and starting her career at 25 years old, the need for life insurance is typically high but the cash flow is usually low. A lot of times in the financial industry, people are trained to sell term life insurance because the cost is lower. The problem is, even though many term life insurance policies can be automatically converted to whole life without an exam, people almost never do it because they weren’t properly educated about the benefits of whole life insurance.

For example, in 20 years, when the client’s term policy expires, she’ll have to buy another term policy. However, at that point, the cost will be much higher because the client didn’t do a conversion program from term to whole life earlier on, therefore leveling whole life premiums. The client who buys term also runs the risk of becoming uninsurable because he will be closer to life expectancy and could have developed health conditions.

As an industry, we need to take the time to properly solve the life insurance problem with each of our clients to determine what policy is best suited for them throughout their whole lives. When a client is looking to solve his or her life insurance need, a complete set of financial facts must be determined prior to any purchase. A full and in-depth financial fact-find can help you discover what your clients’ assets are, their long-term goals, how much money they are saving yearly and what they are putting into a retirement plan.

Education is key

Once you acquire those key pieces of information, you must educate your clients about the options available. Many consumers purchase life, homeowners, and car insurance, but they don’t completely understand the policies’ purpose. This is especially true when it comes to life insurance. Many think it is simply to protect their mortgage, car loan and any current debt, but it is foremost to protect the income their families were anticipating from them.

When consumers don’t understand the value of life insurance, they don’t believe their life insurance need is quite as high as it actually is. Also, unlike consumers’ perception, their life insurance need does not always vanish as they get older. Help your clients understand that a term life policy will solve their current problem, but their need must be reviewed regularly to make sure their families remain well-protected. The regular reviews are the times when the conversion to more permanent products should be discussed, a discussion for which they should have been properly educated from the beginning of the relationship.

Before moving forward with the sale of a product, ask yourself, “Am I having my client buy enough life insurance, and did I bring up the idea of whole or term insurance?” You must explore the various options with your client and present them properly.

Our industry is making it very easy for consumers to buy products, but few people understand what these products actually do. It is up to the financial industry to better educate clients about whole life and term insurance, to help them make better life insurance decisions.

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I found Kristen Wilson a couple months back and she did wonders. I gave her all my former insurance information and found me a great coverage. Although my total cost a month decreased slightly, she practically DOUBLED my coverage for the same price. I easily recommend anyone to her. She even does business insurance and workers compensation also.

Cody S.

I just got a new car and needed to upgrade my auto insurance in a hurry. Kristen was so fast and efficient, that I was able to drive my new car off the lot that day!!! Very appreciative of the service I received with this company.

Joe S.

What a professional experience! Trip and Kristen Wilson make a fabulous father daughter team! My husband and I were very impressed with the care and organization of our insurance quote meeting. Trip really took time to gather extensive information for us to review which really helped us in choosing the correct coverage for our family! Kristen kept us on track with excellent, friendly follow up. This honest and caring family team will really save you a lot of money with their many options and flexible rates that large companies just can't offer. With over 4 generations of insurance experience in the family, Trip and Kristen Wilson know what they are doing! I would highly recommend them to anyone for all personal and business insurance needs!

Genevieve Grant

Great, personalized service, and they saved me money. I've already recommended Kristen Wilson to friends for their insurance needs. Fantastic family-run business.

Kristen is personable, caring and gave me a better quote than Farmers. The whole process was easy and I will never go to a different insurance company again!

Kristen takes the time to explain everything I need to know on my insurance coverage and how to protect myself. She has also helped numerous clients of mine on home insurance with excellent customer service and competitive pricing.

I've been working with Trip & Kristen for a few years now and truly love them both. Kristen does my personal insurance lines and she saved us $250 on renewals without us even asking! She's a pleasure to work with and I would recommend her to anyone. Also, they give out handmade cookies to their clients on holidays... really good ones...

5 stars all the way for the Trip Wilson Insurance Agency! I have worked with Kristen for both my personal insurance and refer her to all my clients as well. She is always on top of it and can get you a quote within a few hours! Her excellent communication throughout the process and follow up are amazing. She is easy to work with and will go above and beyond to make sure you are taken care of! Even if you are happy with your current insurance, it doesn't hurt to give her a call she may be able to save you a few hundred dollars and increase your coverage.