Whole or Term Life Insurance?
Most people aren’t fully aware of the benefits of life insurance and how it’s more to protect your loved ones from having to pay out of pocket for expenses in the event of your death. Life insurance can seem complicated and there are a lot of options to go over. Here we will only discuss the differences between whole and term life insurance policies. Let’s look at whole life insurance first.
Whole life insurance rates are determined by age, medical history, and coverage goals. It is a permanent plan that covers you throughout your whole life. The cash value grows to higher amounts in a tax-deferred account similar to an investment account. Part of the premium you pay goes into this and since it is tax deferred the money grows faster. However, these premiums are higher for this reason. Here are some other benefits of a whole-life policy:
There is no term length since the policy lasts your whole life
You can access the cash value before the plan expires in case of financial emergencies
Death benefits are paid to beneficiary in the event of your death
Now let’s look at term life insurance. This type of policy is fixed for a specific term—maybe 10, 20, or 30 years. If you outlive the term of the policy, the beneficiaries will not receive any payout. Premiums tend to be lower for this reason. It’s also good for young families in the event of an unexpected death if you are the primary financial provider. Again, these policy rates are based on a person’s age, health, and life expectancy. Sometimes it may be possible later to turn this policy into a whole life insurance policy if your needs change.
It’s up to your situation which policy you should opt for. If you’re a younger family with those that rely on you, term life insurance may be the best option. However, that said, it’s important to speak with an insurance professional to find what policy will best fit your needs.