Term Life vs. Whole Life Insurance
If you are looking for life insurance coverage you have an important choice to make: whole life insurance or term life insurance.
Whole life insurance is a policy which covers you for as long as you live, as long as you continue to pay your premiums, while also building up a cash value. Term insurance, on the other hand, covers you for a set period of time at a much more affordable premium.
Term Life Insurance
Term life insurance is a way to provide financial protection to your family should something happen to you. A term policy pays out to your designated beneficiaries in the event that you die during the pre-determined length of time the policy covers. For instance, a 15-year $500,000 policy would pay $500,000 to your beneficiaries if you die at any point during the 15-year life of the policy. Term life insurance can be customized to fit an individual's or family's specific needs by selecting coverage amounts, term lengths, riders and premiums. If a term life insurance policy expires, some policies offer options to renew or convert to whole life insurance. If a policy doesn't include options like these, the policy holder can apply for new coverage and opt to apply for a policy that fits their current needs. However, applying for new coverage will typically require going through an underwriting process. If the insured’s health has changed, the cost of a new policy may be higher than it was before, or coverage may not be available at the desired amount. For this reason it can be important to plan in advance and purchase a policy with a sufficient duration to cover all of your expected needs.
Premiums for term insurance can be quite affordable compared to whole life insurance. Insurance companies determine premiums based on a few key factors:
Term life insurance is a way to provide financial protection to your family should something happen to you. A term policy pays out to your designated beneficiaries in the event that you die during the pre-determined length of time the policy covers. For instance, a 15-year $500,000 policy would pay $500,000 to your beneficiaries if you die at any point during the 15-year life of the policy. Term life insurance can be customized to fit an individual's or family's specific needs by selecting coverage amounts, term lengths, riders and premiums. If a term life insurance policy expires, some policies offer options to renew or convert to whole life insurance. If a policy doesn't include options like these, the policy holder can apply for new coverage and opt to apply for a policy that fits their current needs. However, applying for new coverage will typically require going through an underwriting process. If the insured’s health has changed, the cost of a new policy may be higher than it was before, or coverage may not be available at the desired amount. For this reason it can be important to plan in advance and purchase a policy with a sufficient duration to cover all of your expected needs.
Premiums for term insurance can be quite affordable compared to whole life insurance. Insurance companies determine premiums based on a few key factors:
- Your age and gender
- Your health and medical history
- Your lifestyle
- The coverage amount and term of the policy you apply for
Whole Life Insurance
Whole life policies cover you for as long as you pay your premium. They have the ability to cover you for your entire lifetime. Like term insurance, they pay out their face value if you pass away. At the same time, a portion of your premiums also get put away in a savings plan. It can take a while for the premiums to build up to a meaningful amount, though.
The key drawback to whole life insurance is that it is much more expensive than term life insurance. At the same time, its investment returns are typically below those of other investment vehicles. In other words, you usually come out ahead by buying a term life policy and using other financial tools to invest money separate from life insurance.
However, whole life policies can make sense in a number of different situations:
Whole life policies cover you for as long as you pay your premium. They have the ability to cover you for your entire lifetime. Like term insurance, they pay out their face value if you pass away. At the same time, a portion of your premiums also get put away in a savings plan. It can take a while for the premiums to build up to a meaningful amount, though.
The key drawback to whole life insurance is that it is much more expensive than term life insurance. At the same time, its investment returns are typically below those of other investment vehicles. In other words, you usually come out ahead by buying a term life policy and using other financial tools to invest money separate from life insurance.
However, whole life policies can make sense in a number of different situations:
- If you need insurance coverage past the age of 65 when term life policies become expensive
- If you are looking to get some return from your investment in insurance
- You want coverage for your entire life
Putting it All Together
Term and whole life policies both have their uses. Working with an insurance expert will help you decide which one to purchase at which point in your life. The most important thing, though, is that you set up a plan to protect your legacy and the people that you love. Both term and whole life insurance can accomplish this goal for you.
Term and whole life policies both have their uses. Working with an insurance expert will help you decide which one to purchase at which point in your life. The most important thing, though, is that you set up a plan to protect your legacy and the people that you love. Both term and whole life insurance can accomplish this goal for you.
Term Life vs. Whole Life Insurance
Reviewed by salman
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Reviewed by salman
on
7:58 PM
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