In shopping for life insurance inevitably the decision comes down to Term or Whole Life Insurance. But what exactly are the two and how do they work?
Term Life Insurance, also known as pure life insurance, is a type of life insurance that guarantees payment of a stated death benefit if the covered person dies during a specified term. If the insured dies during the time period specified in the policy and the policy is active or in force, a death benefit will be paid.
There are various types of term insurance policies available, with some offering level premiums for the duration of the policy. Other policies offer decreasing or increasing benefits over time as well as the option to convert from term insurance to permanent insurance. Permanent life insurance is more of an umbrella term for those life insurance policies that do not expire, but include Whole Life Insurance.
Whole life insurance offers coverage for the full lifetime of the insured and its savings can grow at a guaranteed rate. The premiums are fixed and will never increased. The cash value of the policy may also be taken out as a loan, and your beneficiaries receive the death benefit payment regardless of when you die, as long as all of the premiums have been paid. While Term Life insurance allows you to choose the length of the term, the coverage expires once the term is complete.
So what to choose — Term Insurance or Whole Life Insurance?
It all comes down to what you ultimately need. Term life insurance is economical (i.e., friendlier to your waller) because it’s temporary and has no cash value. Term life is a good choice for most families who want affordable coverage. Also a reminder that most term life policies can be converted to permanent life coverage.
Whole life insurance is a good option for those who want to leave behind an inheritance no matter when they die. It’s also a good option for those who have reasons to take advantage of the tax-advantaged cash value accounts or who need to provide lifelong care for a dependent. Since it is more costly, it’s only recommended for those who do not need temporary coverage.
Don’t worry — we can help you compare your options and find the life insurance plan best for YOU! Give us a call today!