Purchasing life insurance is a crucial decision which can help to give you peace of mind that your family and loved ones are taken care should anything happen to them. Making this purchasing decision can be overwhelming and confusing for individuals who are not familiar with the difference between life insurance plans and terminology. Specifically term and whole life insurances can be confusing to those looking to purchase a life insurance plan. Below you will find all of the relevant information you need to understand the difference between term life insurance and whole life insurance.
What is Term Life Insurance?
Term life insurance is life insurance which covers you for a set duration of time. Typically a term life insurance policy is purchased in a duration which matches a financial obligation which a purchaser has. For example, an individual may purchase a term life insurance plan with a 20 year term after they have a child. This ensures that should anything happen over the next 20 years, the life insurance policy can fulfill the child’s financial needs until they are able to support themselves.
There are a number of different term life insurance policies which differ by term duration and payment structure. In order to determine the best term life insurance policy for the needs of you and your family, it is best to contact your local insurance agency to discuss which options are available
What is Whole Life Insurance?
Whole life insurance is much different than term life insurance. While term life insurance only covers an individual for a certain amount of years; whole life insurance covers an individual for the entirety of their life. In many cases, a whole life insurance policy expires at a particular age, for example 95 or 100 years old. Whole life insurance is the most commonly purchased type of life insurance.
|Policy Attribute||Term Life||Whole Life|
|Duration||A set duration typically 10, 20 or 30 years long.||Covers entire life, typically having an expiration date near 100 years.|
|Cost||Considerably lower cost||Considerably higher cost|
|Is there a cash value?||No||Yes|
|Dividends||No||In some cases, it is possible. Ask your insurance agent.|
|Premiums||Typically stays the same throughout the life of the policy.||Typically stays the same throughout the life of the policy.|
How Do I Choose Between Whole Life and Term Life Insurance?
Choosing between whole life and term life insurance comes down to two main factors. The first being the coverage needs of your family. The second main factor is the cost of the policy. When purchasing life insurance and deciding between the two, keep the following factors in mind:
- Do you want coverage for a specific period of time?
- If you have a specific period of time which you need coverage for, term life may be the best option for your situation. However, if an individual is looking for life insurance for the duration of their lives; whole life insurance may be the better option.
- Do you want the flexibility of building cash value?
- Whole life insurance policies build cash value overtime which can then be used for loans and withdrawals prior to fulfillment of the policy. Term life insurance does not provide this same cash value. If the policy is not used prior to its expiration, the policy holder is not able to extract cash value from the policy.
- What is your budget?
- The cost differences between term life insurance and whole life insurance can be dramatic. Considering the affordability of both types of life insurance can help to make a decision on which type of insurance to select easier.
If you are struggling to determine which type of life insurance is best for your needs, the best step to take is to contact your insurance agent. Insurance agencies like the Robert J Stilwell Agency can help to clarify and make clear exactly what each policy has to offer to policyholders. Contact the Robert J Stillwell Agency today and an insurance agent will be happy to discuss the differences between term life insurance and whole life insurance.