Complete Guide to Whole Life Insurance Vs Term Life Insurance
March 16, 2022
Term Life Insurance
Term life insurance is also called pure life insurance, this offers payment of death benefit if the insured person dies during the term. Once the term expires, you can renew it for another term or convert it to a permanent coverage, or terminate it. At our company we offer term life insurance solutions, get in touch with us now for details. We will be glad to help you with all your needs.
Benefits of a term life insurance
A term life policy is cheap when compared to other policies. Term life policies are more affordable and can last until your child’s education is done and all expenses are covered.
You can get a 20-year term policy with a $500,000 death benefit.
It guarantees payment to the insured's beneficiaries if you die during the term.
Depending on the insurance company, you can turn term life into whole life insurance.
You can purchase term life policies for 10, 15, and 20 years.
Drawbacks of term life insurance
There are number of factors that can change the cost of the term life insurance, some of them are larger death benefit or longer duration of coverage. Please note this policy may require a medical exam, health complications can influence the cost of the policy.
Another drawback of a term life insurance is that you can’t use this as an investment to build wealth or save on taxes.
Whole Life Insurance
Whole life insurance is also called traditional life insurance, it offers permanent death coverage for the life of the insured. It also contains a savings component. Whole life is a form of permanent life insurance, it never expires as long as you make your payments.
Benefits of whole life insurance
Most whole life policies locks in at the same monthly rate till you complete the duration of the policy.
Premiums are split, one goes to the insurance component, and other helps build cash value.
You can borrow or withdraw from your cash value amount to pay for college tuition or home repairs
Drawbacks of whole life insurance
The death benefit and cash value are not separate. If you take a loan on your policy, this will be reduced when you withdraw the amount at the end.
It is more expensive when compared to term policy.
Another potential drawback of whole life insurance is its complexity.
If you let the policy lapse, you may face surrender charges.
Any outstanding loan on the policy will reduce your death benefit.
When to choose term life insurance?
If you need coverage for a short time.
If you are looking for a policy to replace your income, if you die and leave behind obligations it can help you cover for the same.
If you are looking for an affordable coverage.
If you are looking only for death benefit and don’t want to use it as an investment vehicle.
Choose whole life if you:
You can afford higher premiums.
Want to leave money for your family after you are gone
Have a dependent that needs financial assistance after your death.
Want life insurance that helps you with cash value.
Key take ways :
A term plan can be perfect for you if you are in your early 20s. If you have any existing health concerns it can help you in the short term.
If you are in your mid 30s with kids, whole life insurance can be good for you. It offers cash value and monetary benefits. A whole life policy will cover for a lifetime and also creates an inheritance for your children.
If you need advice regarding term life insurance or whole life insurance policies, please get in touch with us now.