It’s a question many can’t answer, ‘what is the difference between whole and term life coverage?’ If you’re currently in the market for life insurance, it’s very important to have a clear understanding of the differences and benefits of each.
Why is it so important? All life insurance can be categorized as either whole or term. Before you shop for and compare life insurance policies, let’s take a minute to explore what each has to offer:
Term Life Insurance
Term life insurance is generally your most affordable option. As the name suggests, term life provides coverage for a designated term, anywhere from one to 30 years. It is generally purchased to cover replacement of lost income or a specific debt or expense, such as: a mortgage, college tuition, final expenses, etc.
Whole Life Insurance
Also known as permanent insurance, whole life insurance is a policy that provides coverage throughout your life. In other words, as long as you remain current with premium payments, whole life provides a guaranteed payout. In most cases, whole life coverage costs more in the beginning. Some policies even enable you to build a tax-deferred nest egg which can later be withdrawn or converted into an annuity.
Which is Right for You?
Understanding how term life and whole life insurance differ will help you determine which is best suited to your needs. Let’s use two real-world examples and compare life insurance options:
Sarah is a single mother working to make ends meet. She has a young son who she hopes to one day send to college. Her largest investment to date is her mortgage. Term life coverage is a great option for Sarah. She compares life insurance options and finds an affordable term policy that, in the event of her death, will settle her mortgage and provide her son with basic financial support and college tuition.
Steve is a 35 year old man, his wife Cindy is 32; together they have two young children. Steve and Cindy are looking for a long-term investment tool. They would also like to begin a college savings plan for both of their children. In this case, whole life coverage is a great opportunity for Steve and Cindy. As they compare life insurance products they find a policy that allows them to begin building tax-deferred savings which can be drawn upon when their children are ready to begin college.
Now that we’ve explored the differences in whole and term life coverage, which is right for you? Still not sure? We encourage you to contact us today, speak with one of our licensed insurance agents. Together you can discuss your financial goals and compare life insurance products.
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