One of the common questions among those considering a life insurance purchase relates to the difference between term life insurance and whole life insurance. If you've decided to purchase a life insurance policy, bravo, as you are ahead of the curve. Statistics show that, while most Americans need life insurance for a variety of reasons, the rate of adequate life insurance ownership is actually at a 50-year low. Top reasons for not purchasing life insurance include a gross overestimation of its cost and a basic lack of understanding about life insurance policy products - including the difference between a term life policy and a whole life policy.
When you buy this important coverage you obviously want the best life insurance for your needs. So here is a comparison between term life and whole life, which are the two main categories of life insurance.
Term Life Insurance Policy
Term life insurance is often called "pure" life insurance because you are only paying for the death benefit and nothing else. This is straight life insurance coverage that remains in effect for the policy term, which are most commonly 10, 20 or 30 years. You choose your beneficiary and your policy limits, and you'll be protected if you die within that policy period.
Term life insurance is the most affordable type of life insurance available and you pay the same rate for the life of the policy. While younger adults should consider longer term policies, a shorter term might suit someone who is nearing retirement age or whose children are grown. This type of life insurance is an ideal choice for those looking for low-cost coverage.
Whole Life Insurance Policy
A whole life policy is a type of permanent life insurance that also has an investment component, called cash value. With a whole life policy, you will pay the same premium for the length of the policy, which is your entire life. You will be guaranteed a specific payout for your beneficiaries at the time of your death, and the cash value component has several advantages.
The cash value on a whole life insurance policy can act as a tax-sheltered investment account. As the policyholder, you can borrow against this account and the loans are on a tax-free basis. There are also some riders to this policy that can help with such things as long-term care in retirement years.
Term Life vs. Whole Life
Choosing the best life insurance policy for your needs may depend on many factors. However, if you are simply looking for the most coverage with an affordable life insurance policy, term life insurance will be the best choice for the policy term you select. A whole life policy comes at a higher cost because it locks in a permanent rate and it has an investment component.
Let an IntelliQuote life insurance representative help you with this important decision. We'll walk you through a simple needs analysis that reviews your family's needs and your financial responsibilities so that you can determine which type of policy is right for you. This analysis may include:
Value of In-Home Help
This needs analysis will provide you with the tools to make the most educated decision about your life insurance coverage options.
Let's get started! Contact us to complete a simple needs assessment now.