While most people know that life insurance will pay a sum of money to their beneficiaries if they pass away, they may not be able to explain the differences and benefits of Term Life Insurance vs. Whole Life Insurance.
But if you want to protect your family’s financial future, it’s important to know the basics of these two options.
Term life insurance is typically the most affordable way to give you peace of mind knowing that your loved ones will be cared for even after you’re gone. It is most often available in coverage terms of 10 years, 15 years, 20 years, and 30 years. There’s no cash value component to the policy. Term Life is designed to give your beneficiaries a payout if you pass away during the term.
With Term Life Insurance, you’re only paying for the years where the need is greatest such as when your kids are younger or in college, and it is usually the most affordable type of insurance. When a term life policy comes to the end of its term you either have to buy another policy possibly at a higher cost or go without life insurance.
Whole Life insurance is the simplest form of permanent life insurance. It provides coverage that lasts your entire life as long. Benefits include:
- A life-long life insurance policy;
- Fixed premium payments;
- A guaranteed fixed rate of interest on the cash value;
- Tax-deferred cash value accumulation; and
- The longer you hold the policy, the more cash value the policy builds. You can borrow against the available cash value if a need arises.
Whole Life Insurance is good for people looking for life-long insurance options with predictable premiums, and guaranteed cash value over time.