Term and Whole Life Insurance
A family member’s death may negatively financially affect their relatives, but he or she can get life insurance, from which “[the] named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured” (“Life Insurance”). Life insurance can help cover the deceased’s families’ “unpaid medical bills, funeral expenses, and estate settlement costs… the ongoing costs of running a household,” etc. (Friedman 2011). People should consider the caveats of different life insurance policies, but new dentists should consider term life insurance plans.
Term and whole life insurance plans contain different rules. Term life insurance “simply provides insurance for the policyholder and offers only a death benefit,” when the policy is active during a certain time frame. (“Whole Life Insurance Policy”; “Term vs. Whole Life Insurance” 2016). Although its premium increases whenever the insured renews it and “varies according to your health and other factors,” the premium “will be lower than premiums for most whole life insurance policies…” (“Term vs. Whole Life Insurance” 2016). In contrast, “Permanent (or whole) life insurance policies do not expire – they are intended to provide protection for your entire life” (“Term vs. Whole Life Insurance” 2016). Their premiums are generally fixed, but they vary based on the amount of coverage within a policy and the person’s age, gender, and health (“Term vs. Whole Life Insurance” 2016). Some whole life insurance policies may benefit the insured in the long run because “they may also build cash value… [which] is the additional money above the cost of insurance you can contribute to that grows tax-deferred. Contributions to a cash value option allow you to build a reserve that you may have access to through loan and withdrawal options” (“Term vs. Whole Life Insurance” 2016). Albeit, a person can go with an insurance company that may allow him or her to turn their term life insurance into whole life insurance (“Term vs. Whole Life Insurance” 2016).
New dentists in particular should enroll into term life insurance policies due to their relatively low costs instead of whole life insurance policies (Hanks 2016; Samaras 2008). While dentists could invest in a whole life insurance policy to get profit in the long run, Brian Hanks, “Practice Purchase Advisor” of Practice Financial Group, says, “When you try to overlay investments on top of [insurance, which is a transference of risk], it gets exponentially more expensive. Keep your insurance in its own lane, and keep investments in their own lane” (Hanks 2016; “Whole Life Insurance Policy”). Though, Hanks also states, “While it’s true whole life rarely gets recommended for our clients, there can be situations where it makes sense. Typically, whole life insurance has a place in the portfolios of high-earners who maxed out their other investment opportunities and are looking for an ultra-conservative place to invest” (2016).
While people should consider different policies, new dentists can enroll into term life insurance policies for their low premiums, but can consider getting whole life insurance policies later.