Should You Buy Term or Whole Life Insurance (420 Friendly Edition)

Chris AbramsPosted in Frequently Asked Questions last updated on July 5, 2021

Should you buy term or whole life insurance? That is one of the first questions you should answer when looking into cannabis friendly life insurance. The good news is that since there are only about a dozen companies who insure recreational cannabis at reasonable rates, you don’t have the overwhelming 800+ life insurance companies to choose from. Luckily, some of the best life insurance companies don’t care whether you smoke weed or not.

The First Thing You Need to Know When Looking Into Term or Whole Life Insurance

Term life insurance means that the life insurance company will pay your beneficiaries a set amount if you die during a specified time period. It sounds a lot like gambling to many people. This unknown factor is why people sometimes choose permanent life insurance instead of term. There are several types of term life insurance. But they all fit under the basic umbrella of term insurance as opposed to permanent.

(Whole life insurance falls under the category of permanent insurance. We will use permanent insurance going forward to mean all types of life-long life insurance, including whole life.)

Permanent life insurance stays with you for however long you live. That is assuming you pay your premiums. If you stop paying, then the policy lapses. The types of permanent life insurance represent different needs for your family. Some of them also function as investment vehicles.

The next several sections are dedicated to term life insurance followed by permanent life insurance. Lastly, there is a comparison of the two.

To get an idea of life insurance cost, use the Life Insurance Quote form on this page to see a quote now. Questions? Call us for confidential help. We work for you and not the insurance companies. Our goal is to get you the best life insurance policy at the lowest rate for your situation.

Types of Term Life Insurance

There are 4 or 6 types of term life insurance policies depending on who you ask. Several types change due to riders, but we are categorizing some of these into types as well. They change the nature/purpose of the policy instead of adding an extra component.

Level Term Life Insurance Definition

Level term life insurance is where the premiums and the benefit amount remain the same throughout the term.

This is the most common type of term insurance. Most people will take out a 20-year level term when they have children in order to provide for them. It can also cover business expenses.

Increasing Term Life Insurance Definition

Increasing term life insurance is where both the premiums and the benefits increase throughout the term.

This is another popular choice for families just starting out. Particularly families with young children. Premiums start out cheaper, but over time they increase as the insured establish their careers and earn a better living.

However, we would recommend a level term or an increasing universal life policy over this type. You’ll get more for your money in the long term this way.

Decreasing Term Life Insurance Definition

Decreasing term life insurance lowers the benefits and premiums over the course of the term. Some people call this “mortgage term insurance.”

As you can probably guess, its primary purpose is to cover mortgages. We don’t recommend decreasing term insurance. Reason is you can usually buy a level term policy that is less expensive and has a level death benefit. Why pay more for a decreasing term life insurance death benefit?

Family Income Term Life Insurance Definition

This is one of the types of term life insurance that could be a level term with the addition of a rider.

The family income term life insurance provides a monthly stipend instead of a lump sum benefit. People will opt for this type of payout when they want to make sure that their beneficiaries will not blow through the entire benefit in a short amount of time. (Sometimes family members don’t always have great financial sense.) This is a product families sometimes choose who want to have their life insurance replace their income.

Convertible Term Life Insurance Definition

Sometimes this is accomplished with a rider you can add to a policy. Other times policies automatically come with this option. It all depends on which term life insurance company you choose.

Convertible means that you can convert your term policy into a permanent policy. No new underwriting required. Sometimes you know that you have a good chance of medical problems as you age. This allows you to skip the risk of uninsurability if you think you might want to continue your life insurance.

Annual Renewable Term Life Insurance Definition

An Annual Renewable Term Policy is one that you have to renew every year.

When you renew your policy, it will be at your new age which means higher premiums. Life insurance gets more expensive as you get older because your odds of dying increase.

This works well for people who don’t know how long they might want insurance but want to make sure they are always insurable. The good news with this type of policy is that no matter what happens to you medically, you can still renew. Whereas with a new policy or other companies you might be uninsurable.

Other Provisions of Term Life Insurance Policies (aka Riders)

Riders are something you can attach to a life insurance policy that makes it do different things. Like adding different seasonings to your popcorn. It’s still popcorn, but the flavor might be a little different.

Accelerated Death Benefit Rider

The accelerated death benefit offers some of your death benefit while the insured period is living. It comes with the condition that the covered person must be terminally ill and within 12-24 months of death.

This can help pay off medical bills that stack up or perhaps a trip around the world.

Accidental Death & Dismemberment

You find accidental death more commonly on life insurance policies with graded benefits.

For example, a guaranteed issue policy might only pay out 20% of the death benefit the first year. Except in cases of accidental death, where they often pay everything.

Accidental death and dismemberment riders on traditional policies will provide an additional death benefit if the person dies due to an accident.

Accidents are things like car crashes or fires. Never illnesses, even previously undiagnosed ones.

Critical Illness Rider

The critical illness rider helps cover catastrophic (although often survivable) medical conditions. You will receive a lump sum upon diagnoses taken out of your death benefit.

A critical illness encompasses things like cancer or a stroke. You can use the money from your life insurance to cover any medical costs or help make lifestyle changes.

Disability Insurance Rider

Disability insurance will pay out a benefit if you are unable to do your job. It’s essentially insuring your income stream.

If your doctor says you are unable to do your job because of X, then you get paid every month by your insurance company. Usually, this lasts for either 12 or 24 months.

Family Income Rider

Like we covered in the types of term life insurance section, this will change your benefit payout from a lump sum to a monthly or annual stipend.

One of the good parts of this rider is that many companies will reduce your premiums if you add it. They are on the hook for less money at any given time. It’s easier for them to invest your premiums and make money off of them if they have more time in order to do so.

Long Term Care Rider

Long term care provides extra money to assist people who need a little extra help with their activities of daily living. Think of nursing homes or assisted living centers. Even for folks who just need someone to stop by their house and help out a few times a week.

The long term care rider kicks in when someone cannot do two (or more) activities of daily living. The activities of daily living are defined as follows:

Eating
Bathing
Dressing
Toileting
Transferring
Continence

You can also get a separate long term care policy. (If you look into this, ask about 10-pay.)

Term Conversion Rider

Term conversion rider was one of the things we covered under the types of term life insurance policies. It allows you to convert your term life insurance to permanent life insurance at the end of your term.

Insurance companies will offer this, even without extra underwriting because it means they get to keep you on their books. If you have health issues, you may pay a little less than you likely would if you shopped around for another policy. The insurance company retains a customer this way.

Waiver of Premium

Waiver of premium is helpful. It allows you to skip paying your life insurance premiums should you become disabled.

420 Friendly Term Life Insurance Companies

Not every company will be open to recreational smoking. Those that are almost always offer several types of life insurance.

Check out our complete list of marijuana friendly life insurance companies. But here are a few that offer different types of term life insurance for both medical marijuana patients as well as recreational smokers.

Types of Permanent Life Insurance

There are 5 types of permanent life insurance currently available in the US. Each serves a different purpose.

Whole Life

Whole life is permanent life insurance coverage that covers you for your lifetime or to age 121, depending on the company.

The other main difference is this has a cash value accumulation feature. That allows you to borrow against your policy to do whatever you want with. You could use this to fund a business that you couldn’t otherwise get a loan for, pay off medical bills, or even go on vacation.

Variable Life

Your company invests your cash value accumulation component for you. They will let you know on your statements how much you have available.

Variable life insurance is an investor’s option for whole life insurance.

Instead of slowly accumulating the cash value, the life insurance company invests your cash value component for you. Which can mean that your cash value component can grow much faster than it would in whole life insurance. You could also lose money, so we don’t recommend this option.

With all this potential extra money building up, you can use that to pay off your premiums (less out of your pocket) or add it to your death benefit. Although if your investments don’t do so well then you won’t have that option.

Universal Life

Universal life policies are more like super flexible whole life policies. You have a set amount in premiums which you must pay each year to maintain the policy. Yet you pay those premiums when it works for you.

This works best for people with seasonal fluctuation to their income.

Indexed Universal Life

Indexed Universal Life Insurance is one of our favorite types of life insurance. The owners of the company personally use it to supplement retirement. You get tax-free distributions without any stock market risk.

Survivorship Life

Survivorship life insurance is for couples. It’s is cheaper than buying two separate life insurance policies. The beneficiaries will only see the benefits once both people pass on.

Most people who apply for survivorship life use life insurance to make sure their children have something when they’re gone or to cover estate taxes.

What Is This Cash Value Thing Anyway?

types of permanent life insurance cash value

The cash value accumulation is a feature in the contract that builds up over time. It’s is neither a part of the death benefit nor can it be used when the person passes away.

The cash value accumulation is basically the ability to loan yourself money. You use the value of your death benefit as collateral. The insurance company subtracts any amount not repaid by the time the insured person dies.

You can use this money for anything. It’s not like a bank where they want to know if you need a car loan or a personal loan or a home loan. It’s yours to do with whatever you want.

We see a lot of families use their cash value accumulations to fund annual vacations. Other folks will use the money to start a small business. What you do with it is up to you.

Pros and Cons of Permanent Life Insurance

It’s time to get a little more in depth than the term vs permanent section.

Pros

You will use your insurance at some point
You have access to an easy loan
Some types of permanent life insurance let you use the cash value accumulation to pay the premiums
Some types let you pay your premiums on your schedule
You will never have to renew at a higher rate

Cons

More expensive
Some types of permanent life insurance can be difficult to understand without a background in investing
Some types of permanent life insurance are affected when the market is in a slump
It’s life insurance so you must qualify healthwise

420 Friendly Permanent Life Insurance Companies

Most life insurance companies have a zero tolerance policy for recreational marijuana despite legalization in many states. Luckily there are about a dozen life insurance companies who have figured out that smoking in moderation is just fine. They also help out medical marijuana patients looking for coverage.

If you are looking for permanent life insurance and smoke recreationally or medically, start with these three.

Term Life Insurance vs Whole Life Insurance

There is not a clear right decision for everyone. The first question is whether or not your family can afford permanent insurance. Then you should examine your reasons for life insurance. Questions? Just ask – we are here to help!

You see some strong opinions with blanket statements about which type is better. It’s not that simple.

Term life insurance is great for families without a lot of disposable income. It works fantastically for families who only want to cover the parents during their working years. People who just want to make sure their house gets paid off if they die buy term insurance.

Term insurance is cheaper. Yet at the end of your term (which you are statistically likely to survive) you then come out with nothing to show for it.

Permanent life insurance is for people who want to use the insurance to leave money to their heirs. They want to make sure their spouses will have something to live on no matter what age.

It costs a little more, but there is more to it as well.

Term life insurance is characterized by its set length of time. Permanent (or whole life) insurance continues until you either die or stop paying premiums.

There are pros and cons to both types of life insurance products. What is a good fit for you depends on your financial situation as well as your reason for considering life insurance.

Term life insurance is almost always cheaper. So people who know they want to protect their families, but may not have tons of disposable income, tend to choose term. On the other hand, people who know they want to leave something for their loved ones, no matter what age, tend to go with permanent life insurance. It’s simple and the money is guaranteed to be there. Unlike many types of investments.

How Marcan Insurance Can Help

It can be tricky to figure out what type of life insurance is best for your family. Particularly with all the weird legal situations around recreational marijuana. Our team here at Marijuana Life has helped hundreds of families find the life insurance that’s right for them.

If you have any questions whatsoever, know that all personal/medical information is confidential by law, even from the government itself. We are happy to answer your questions and to help research which cannabis friendly plans might work best for your family.

Give us a call at (888) 987-8447. With Marcan Insurance, there is never any pressure or obligation to buy.

Should You Buy Term or Whole Life Insurance (420 Friendly Edition)

The First Thing You Need to Know When Looking Into Term or Whole Life Insurance