The Difference Between Whole and Term Life Insurance
We know that thinking about life insurance is not everyone’s cup of tea. However, if someone is financially dependent on you, life insurance is a topic you just cannot avoid.
Life insurance is insurance that provides cash to your loved ones when you die. This sum of money is referred to as the death benefit and is intended to replace your income and the numerous ways in you support your home and your family. Your beneficiaries can use this money to pay for a variety of needs like paying funeral expenses, the mortgage, college tuition and more.
Getting life insurance doesn’t need to be hard or boring, but not all life insurance is created equal. There are two main types of life insurance, term life insurance and whole life insurance, also known as permanent life insurance. And depending on your individual situation, one may be better for you than the other.
So, what are the differences between term and permanent life insurance? Let’s break it down for you:
Term Life Insurance:
Term life insurance protects you for a certain period of time (the term) which is usually a period of 10, 20, or 30 years. This option is a good choice if you only need protection for a certain amount of time, like until your kids leave the house or finish college, or until your mortgage is paid off.
In most cases, term life insurance will provide the greatest level of coverage for the lowest amount of money. Because of this, this kind of coverage is a great option for individuals who are working within a strict financial plan. For those who are on a limited budget, term life insurance can be a great gateway into a whole life policy. This is because, in most cases, a term policy can be easily converted into a whole life policy. This must be done by a certain time during your term, so make sure to talk with your agent to discuss when is the best time to switch. Depending on your situation and your financial goals, a combination of term and permanent insurance may be the best choice for you.
Whole Life Insurance:
Now, permanent life insurance, often referred to as whole life insurance, provides protection for the entirety of your life as long as you continue to pay your premiums. Some policies can also accumulate a cash value, which you can use on a tax-deferred basis to buy a home, supplement your income during retirement, pay for an emergency, and more.
Because of these extra benefits, the premiums are usually higher than what you would pay for the same amount of coverage with a term policy. It is important to keep in mind that the younger and healthier you are when you open your life insurance policy, the less expensive the premiums are.
With all that being said, the best time to purchase life insurance is right now and a great way to get started is to speak with a reliable independent insurance agency, like Platt Insurance, to ensure that you and your loved ones are properly protected.