Term Life vs. Whole Life: What's the Difference?
Updated: Nov 12, 2021
Stephanie Banks – November 10, 2021
If you don’t work in the life insurance space, you’ve probably still , heard of these products. But you might be wondering: What’s the difference between term & whole life? You might also be wondering which one is best for you. Hopefully once you’re done reading this, you’ll have a better grasp and know which product works best for YOU. So let’s dive right in…
Term Life covers you for a set period of time. Since it’s not a life long insurance, it is less expensive. It only pays out if you die during the term. Death benefit and monthly premiums stay the same for the duration of the term.
Whole Life lasts your entire life (go figure) and has an investment account which grows cash value. Understandably, it is more complex and more expensive than a term policy. It is the most common type of permanent life insurance. Unlike its term counterpart, it pays out regardless of when you die. Also, the cash value accumulates over time and you can borrow against it. Premiums stay the same for as long as you live, the death benefit is guaranteed and the cash value grows at a guaranteed rate.
Reasons to choose Term Life:
· Only want coverage for a limited number of years. Such as for paying off a mortgage or raising children
· It’s more affordable than whole life, especially if you’re young and healthy
· You want permanent coverage but can’t afford it right now. Many term policies give you the option to convert your coverage into a whole life policy.
Reasons to choose Whole Life:
· Can comfortably afford the higher premiums. It’s important when choosing this, that you understand that it is a lifelong commitment so you’ll need to make sure its affordable for you.
· Want to leave money for your heirs. You can use it as an inheritance.
· Have a lifelong dependent such as a disabled child. You can use your policy to fund a trust to provide care for your child once you’ve passed away. It’s important to speak to an attorney or financial advisor before setting up the trust.
· Want a policy that grows guaranteed cash value.
Hopefully by now, you’ve learned enough to be able to decide which type of policy works best for your life circumstances. Reach out to me TODAY to shop companies and get you coverage and more importantly, peace of mind. The sooner you make a decision, the cheaper your premiums will be.