There are a lot of things about life that we can’t control, including when it ends. Although you cannot control that, you can make sure your family is financially secure when that time comes. Now is the time to shop for life insurance – and when you begin your search, you will see that there are multiple types of policies to choose from, including whole life insurance and term life insurance. Most people struggle to choose which one is right for their situation, and some will even switch from one type of policy to the other. Before choosing which one is best for you, you need to consider the basics, well as the benefits and drawbacks, of each.
Whole Life Insurance
Whole life insurance is a type of permanent life insurance policy that stays in effect for the entirety of your life, which is why it is more expensive than term life insurance. It can be viewed as a combination of an insurance policy and an investment, because the cash value of whole life accrues over time. When you pay your premium, a portion of it is added to the cash value of your policy; you can also choose to borrow or withdraw funds as needed. You can withdraw most or all of what has accumulated tax-free, as long as you stay within government guidelines when paying premiums.
The one drawback of whole life insurance? It is 5-15 times more expensive than term life insurance.
Term Life Insurance
Term life insurance is the cheaper option of the two, because a term life policy does not remain in effect for your entire life. With this type of policy, you have the option to choose how long you want to be insured; it can be anywhere from 10 to 30 years. One of the main differences between term and whole life insurance is that term will only pay the face amount of the policy to the named beneficiary, and there is no cash value that can be withdrawn from the policy until you pass away. If the policy expires before your death, you forfeit the money.
This type of policy is ideal for people who want to be insured over a certain period of time, such as during the payback period of your mortgage or other loans. You can also covert term policies into a whole life policy if need be.
Before considering term life insurance, you should be aware that these policies are only temporary and only last for the specific amount of time that you choose. When the term ends, you will have the option to renew in most cases, but you will generally pay a higher rate.
Which Is Best For You?
When choosing the life insurance policy that best suits your needs, you will have to consider your assets, loans, budget, and just how long you want coverage for. Do you want to make sure expenses for things like mortgage payments or your kids’ college tuition would be covered? Then a term plan is a great affordable option. Or do you want to earn a cash value that you can borrow from and that your family can use whenever you pass away? Then whole life will work better for you.
Both whole life insurance and term life insurance premiums will remain the same throughout the life of the policy, but whole life is more expensive because the policy remains in effect until you pass away, not just for a certain time. If you are on a budget, term life is right for you, but if you want to build cash value or if you have long-term dependents, then whole life is right for you.
Before choosing a life insurance policy, we recommend consulting with a licensed agent. They will be able to discuss your options and find the plan that is best for your needs. Don’t wait until you need life insurance to get it, check rates today from the top-rated insurance companies we have provided below. Always check multiple sites to make sure you have bargaining power and that you know the different advantages of each company. Ensure that a hard time for your loved ones isn’t made harder by a financial burden, check life insurance rates today.