Life insurance can be confusing. In fact, there is such a perception about life insurance being complicated that many people just avoid purchasing a policy altogether. In the 2015 Insurance Barometer Study, one of the top reasons (38%) given for not purchasing life insurance was not being sure about what type to buy.
Unfortunately, not having life insurance can be disastrous for your loved ones. Unexpected losses occur each day, and it would be a tragedy to leave your family without the means to replace income or pay important expenses left behind. Here is what you need to know about the difference between whole life and term insurance, several pros and cons of each, and some tips for making the right life insurance policy choice.
What is Whole Life vs Term Life Insurance?
Life insurance should give you peace of mind and financial benefits in the future. The first question you should ask yourself is how long you want that peace of mind in place. A whole life policy is permanent, whereas a term life insurance policy is temporary. With a term policy, you choose a time period for the policy, such as 10, 20 or 30 years and the premium stays the same through that guaranteed time period.
The coverages vary between the two policies as well. Both provide you with a death benefit amount that will be paid to beneficiaries when you pass away. A whole life policy also has a cash value component which accumulates over time. This is a nice benefit, but it comes with additional costs.
The Pros and Cons of Whole Life Insurance
The main benefit of a whole life insurance policy is that it will never expire. You are quoted a monthly or annual premium for your insurance and that premium will remain the same for the rest of your life. Unfortunately, a whole life policy is significantly more expensive than a term life policy for several reasons. You are getting life-long coverage and you are receiving a cash value benefit. The cash value is a living benefit that you can later borrow against for retirement or even use to pay premiums later in life.
The Pros and Cons of Term Life Insurance
Term life insurance is a pure insurance policy. This means that you pay a premium for the stated amount of financial protection for the "term" of the policy. In essence, this is the purpose of life insurance. The biggest benefit of a term policy is its affordability. This type of policy is much easier to fit into nearly any family budget and will provide the essential financial benefits to your loved ones if you pass away. Most term policies can also be renewed or converted to a whole life policy at a later date. The only downside is that your premium increases at the end of the guaranteed term.
Making the Right Life Insurance Choice
What type of life insurance policy you select is an individual choice. Many experts recommend a term life policy. It is the most affordable option for life insurance. For a more complete finanical plan you are generally better served by investing the difference between a term and whole life premium in a diversified investment account for long-term gains. To get started with an affordable life insurance policy, request a quote from multiple companies now.
Knowledge is power. The more you know, the easier it is to make an intelligent choice. Everyday life, as well as certain events and circumstances, require you to make choices. And peace of mind is gained when you feel good about the decisions you make.
When it comes to life insurance, IntelliQuote is there for you to make the intelligent, well-informed choice. From term life insurance to universal life insurance and final expense insurance, we make it easy for you to compare, shop and save. Get multiple quotes now and make the intelligent decision for Life.