Group, term and whole life insurance

0:01- I remember when I was younger, before I got married and before I had kids and people who are dependent on me, I used to see these ads for life insurance and just, I used to think to myself, what a downer. Who wants to think about that? And it's a strange type of insurance because you pay for it, but you don't directly benefit from it.

0:20It's paid to beneficiaries after you're gone. But then I got married, then I had kids, and then I did start to think about what happens if, heaven forbid, something happens to me? How will my family pay the mortgage? How will they have money to go to college or other emergencies that might come up in life?

0:40And that's when I started shopping around for life insurance. And there's three basic buckets that you're going to see when you see life insurance. The first is one that might be offered by your employer, and that's group life insurance. Now, that can be usually pretty good because it's just a benefit you have.

0:57You can check a box. The problem with group insurance, and you don't have to take a medical examination, it just automatically happens, the only issue with it is it often isn't large enough for you to really be able to support or your family to be able to support themselves after you're gone.

1:14So it might help on the margin, but it's not going to necessarily be enough to pay the mortgage for the rest of the mortgage or to send your kids to college or to pay medical bills or anything like that. Now, the other two, when you just think about going out there in the market and getting policies, you'll hear term life insurance and you'll hear whole life insurance.

1:36So the main difference is term life insurance is for a specified period of time. So you pay a premium every year. It might be a 10-year term policy. It might be a 20-year term policy. And if, heaven forbid, you were to pass away in that term, then they will pay the money to the beneficiaries.

1:55Whole life is you just keep paying and then you pay the rest of your life and it's in effect the rest of your life, in theory, until you die because we are all going to die at some point. Now, term life insurance tends to be a good bit cheaper. You might say, why is that?

2:12Well, if let's say you're just starting a family, you're 30 or 40 years old, the probability that you pass away, let's say you're looking at a 10-year term policy, let's say you're looking at a 20-year term policy and you are 30 years old and you just had children, you're like, okay, 20 years, that might be enough to pay the mortgage.

2:29That might be enough to make sure that the kids are provided for until they go to, if anything were to happen before they become adults, et cetera, et cetera. So I just want that 20-year term. But for a 30-year-old, the probability that you'll actually pass in the next 20 years is not as high than if, say, you're saying, I'm just gonna pay for the rest of my life.

2:54And at some point, I definitely will pass. So people are gonna charge, insurance companies are gonna charge more for that whole life policy than the term life. Now, the whole life, it has the benefit that it goes the whole life, and it also is a financial asset that you can oftentimes cash out, take loans against, even sell in certain cases.

3:12Now, I'll tell you what I've done and the policy that I have, I have a term life insurance because I did not wanna pay those large premiums. If I have the extra money, I can invest that in different assets myself. But I do have concerns that, okay, my kids are still reasonably young, especially when I got that term policy.

3:31We do have a mortgage. If anything were to happen and I were to lose my income and I were to pass away before my kids are adults, before they have a chance to go to college, I want them to get some type of a payout so that they can pay off the house, they can hopefully go to college, et cetera.

3:47And so that's why I went with the term. Now, both term life policies and whole life policies, they're gonna do it based on your age, based on your health. There's usually a medical exam. I definitely had a medical exam. Someone came over and took my blood and looked at my height and checked my BMI and asked about all, you know, my health history, et cetera, et cetera.

4:05But those are the three categories. So I know it's not the most pleasant thing to think about what happens when you die, but when you have folks dependent on you, it is something that you should think about. And once again, group, get through employer, doesn't hurt.

4:18I think I checked that box off with the employer, but I also have a term life insurance, but some people will go for whole life on top of that, or instead of that.