Life insurance, like all other types of insurance, provides protection and security in case something goes wrong. In the case of life insurance, this would be the death of the insured. By ensuring that a policy is in place, the insured has helped ease any potential financial burden (at least, for a while) by providing financial support in the form of a life insurance payout.
is subjective, however, and may depend on various personal factors. The type of life insurance policy chosen is also specific to one’s personal situation and preferences. There is no single type recommended for everyone. This is why it is useful to understand the difference between the two most : integer and term.
If you are currently looking for life insurance or just want to increase the coverage you already have, now is the time to do it. You can start by getting a quote today.
Before deciding on the type of insurance policy you want, make sure you understand how the two main types work.
Whole or term life insurance
There is no one answer when it comes to life insurance. You may even already have a type of life insurance chosen for you by a spouse, family member or employer. But understanding the differences between whole and term can help you make the right decision.
Whole life insurance
Whole life insurance tends to be more expensive because you have more options. Also known as permanent life insurance, this type remains active for the lifetime of the insured. There is no policy expiration date. Therefore, the premiums are relatively high.
But there is another factor to consider with whole life insurance: the cash flow and investment aspect. Some whole life insurance policies pay a dividend. You can also increase the dollar value of the policy and cash it in to use for other expenses, debts, and more. This type of life insurance should also be seen as an investment – because the extra money the insurance company has received from the premiums is invested for you.
In short, whole life insurance is more expensive, but the benefits may be worth it. If you want to explore your life insurance policies, there are several companies waiting to help you. Get a price estimate and choose the type of policy that’s right for you and your family.
Term life insurance
This type of coverage is self-explanatory. It is limited to a term or period of your life. It will not last the life of the insured and will have to be renewed. Terms can be 15, 20, 30 years or any other agreed time frame. If the insured dies during one of these terms, the policy is paid out to the beneficiaries. If they do not and the policy is not increased for another term, no payment will be issued.
Due to time constraints and the fact that payments are not invested or generate cash value, premiums for term life insurance are generally less expensive than for whole life insurance. But each time you renew, expect the premiums to increase. This is especially true if you become ill or suffer from a high-risk medical condition during one of your terms.
Differences between whole life and term insurance
Ultimately, both types of life insurance provide your loved ones with some financial protection in the event of your death. When you buy life insurance, you can designate one or more beneficiaries and determine how you want to distribute the proceeds. Although whole life insurance seemingly offers the best route, that doesn’t necessarily mean it’s the best option for the policyholder.
To summarize, here are some key differences between the two policies:
- Length: A whole life insurance policy is not dictated by predetermined deadlines. A term life insurance policy, on the other hand, involves coverage between a specific period (usually between 10 and 30 years) chosen by the policyholder.
- Cost: If you are searching strictly by cost, term life insurance may be the best route. Of course, it won’t last forever and, by definition, it will only offer coverage for a fixed period of time. But maybe that’s all it takes. This especially applies to young people or those just starting a family who are looking for protection but don’t want to break the bank in the process.
- Cash assess: With whole life insurance, you can potentially get a dividend or withdraw some of the cash value (note: it’s usually best to let your money grow before you take this action). Term life insurance has no cash value.
No matter where you fall in that range and what your personal preferences and circumstances are, most financial experts agree that having life insurance is a good idea. Whether it’s term or full is not as important as just having the protection in place.
Remember that policies can always be adjusted and preferences change (especially as the insured gets older), but coverage and protection for you and your family is still essential.
Still not sure which type of life insurance is right for you? Get a quote and explore your options today.