Term Life vs Whole Life Insurance: Crack the Code and Make the Best Choice for You

Life insurance is an important way to protect your young family.

Even though you know it’s necessary, you may drag your feet about actually getting a policy because it seems too daunting.

Getting some clarity can make all the difference.

There are two main types of life insurance: term and whole-life (or permanent).

Let’s take a closer look at each of them.

Protect young family

Term Life Insurance

This is the simpler of the two types.

Your family (or whoever is named as the beneficiary on your policy) would only receive a payout if your death were to occur during the term of the policy.

The length of a policy is normally between 1 and 30 years.

The majority of term policies won’t have any other benefit provisions.

Under the umbrella of term life insurance, there are two categories.

  • Level term. With this type of policy, the death benefit remains the same throughout the span of the policy.
  • Decreasing term. The death benefit will drop in one-year increments over the duration of the policy’s term.

Whole life

Also called “permanent life insurance,” whole life insurance will pay out a benefit to your beneficiaries whenever you die – no matter how long you live.

There are three main types of whole insurance.

  • Traditional whole life.
  • Universal life.
  • Variable universal life.

Within each of these types, there are variations that can get confusing.

It’s always best to work with an independent insurance agent who can help you determine the best life insurance choice for you and your unique situation.

Another way to get some insight is to check out the pros and cons.

Pros and cons of term and whole life insurance

Let’s start with the pros of a term life insurance policy.

  • It’s easy to understand. There’s no worry that you’ll be hit with hidden fees, risks or exclusions.
  • It’s usually the most economical type of life insurance.
  • If you choose to cancel the policy before it expires, you won’t lose any value.

Here’s the downside.

  • Your coverage expires when the policy expires. If you still want insurance, you’ll have to get a new policy or convert the one you have into some form of whole life/permanent insurance.

Now let’s examine the pros of a whole life policy.

  • It doesn’t expire. It will pay out to your beneficiaries even if you live to be 100.
  • The cash value component makes it a viable part of an estate planning strategy or a personal finance plan.
  • It forces you to have a savings.

Here are the negatives.

  • It’s more expensive. It may even be up to four times the cost of a term policy.
  • It may be cost prohibitive. The expense could cause you to buy less coverage than you need or to give up the policy early.
  • The interest rate is less than what you would get from a different kind of investment.
  • It’s complicated. The various types of permanent life insurance make it daunting and difficult to understand.

You don’t have to fly solo

It’s not wise to do all of your life insurance research on the internet and then attempt to make a decision.

Resources like this one provide a valuable framework and an introduction to life insurance products and services, but it’s always best to talk to an expert.

There’s no substitute for the solid advice of an insurance professional.

You need the help of someone who will delve into your situation and come up with a customized plan that’s suited to the needs of you and your family.

Make a confident choice about your future with the help of a trusted insurance professional.

Do you have adequate life insurance coverage or is it time to review with a pro?

Protect Your Family

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