When you're researching life insurance options, you want coverage that fits your specific needs. You may find that traditional
Blended term life insurance can offer this financial flexibility between what you need now and what you may want later in a single contract. Think of it as a combination of term and whole life insurance. The term component helps keep premiums affordable when you're younger. The whole life component allows you to build cash value and provides a lasting death benefit.
For some, this mix of two products' features in one contract may be a better choice than buying one over the other, converting from one to the other later, or purchasing separate contracts. Here's what you should know.
Term vs. permanent vs. blended life insurance
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Blended life insurance is a hybrid of term and whole life insurance and protects you through different stages of your life. These contracts offer the benefits of permanent insurance while offering a lower premium that fully guarantees whole life coverage. This can provide a necessary layer of permanent protection whether you are just starting out, or in retirement and looking to secure a
What are the advantages of blended life insurance?
Blended life insurance can be an affordable way to make the most of what life insurance can offer. Four features might make it a good fit for your needs.
1. Affordable premium payments
Compared to permanent life insurance, blended life tends to have lower premiums. It can be a good way to get the permanent protection you want at a price that fits your budget. Your contract may also feature flexible premiums, where any extra you pay can add
2. Coverage that lasts & grows
Because of the term life insurance nature at the start of your contract, blended life insurance can allow you to afford a higher initial death benefit compared to a traditional whole life insurance policy. This feature can be especially helpful when you're younger and have large financial obligations but haven't reached your peak earning years. The lasting death benefit you get with blended life insurance can provide financial protection for your family as long as you pay your premiums.1
As you continue with your contract, you can enhance it with additional coverage, letting it grow as your circumstances and needs evolve. Additional coverage can help you replace your term coverage with permanent coverage sooner, grow your cash value faster and become eligible for larger dividends.
3. Cash value with set growth
Like many permanent contracts, your blended life insurance's cash value grows over time. It's also a safety net you can fall back on if borrowing against your contract is a better option than your other potential sources of cash.
4. Potential for dividend earnings
With a blended life insurance contract, you may be eligible to
How the cash value of life insurance works
What are some drawbacks of blended life insurance?
Most life insurance choices have trade-offs. In exchange for the benefits a blended life contract can provide, you need to be comfortable with these three potential drawbacks.
1. It must build up to permanent coverage
As mentioned, a blended life contract begins with limited-time, renewable coverage. So at the start, blended life insurance doesn't offer the same guarantees as traditional whole life. You get those guarantees later as you replace the renewing terms with permanent coverage.
2. Potential for less dividends & growth than other insurance
Compared to a permanent life insurance contract of the same size, the dividends paid on blended life insurance across the contract's lifetime are usually lower. Also, while you're under term coverage, your cash value may not grow as quickly because you may opt for any extra you pay in premiums to increase or enhance your coverage first.
3. Evidence of insurability may be required
To purchase additional insurance, you may be required to provide evidence of insurability. If your health has worsened, you may not be eligible to increase your coverage, or you may be asked to pay a higher premium for the additional coverage.
Deciding if blended life insurance is right for you
Blended life insurance can be a good idea when you want to lock in a smaller permanent death benefit without compromising on the total payout your family receives. In some situations, blended coverage might be a better choice than term or permanent alone.
- You're a young couple with a growing family. Everyone may be healthy now, but what would happen if one of your children, parents or siblings became your financial dependent later in life? You may want the security of permanent coverage because you don't know what life may bring. Blended life insurance allows you to reach your death benefit goal now with a combination of term and permanent coverage.
- You co-own a business. Blended insurance can offer the appropriate amount of coverage while building cash value that can be a future asset of the business owner.
- Your spouse is dependent on your pension or Social Security income. Blended life insurance could provide the death benefit amount your spouse may need at a cost you can afford.
It can be worth discussing your family's life insurance needs with an expert. A