Youve made the wise choice to invest in life insurance for you and your family. The decision to elect insurance coverage means that your loved ones will be well taken care of after your passing, and will continue to enjoy the quality of life that they have become accustomed to. Sufficient insurance coverage means that mortgages can be paid off, college expenses can be met, and your family wont have to endure some of the stress that can accompany a loved ones passing.
Now that youve decided to purchase life insurance, an important consideration must be made – should you elect whole life coverage, or term life insurance? For those who are just learning about the differences between these two forms of life insurance, it pays to note the main differences between the two, as well as the characteristics of each that will provide the biggest benefit for you and your family.
Whole life or term coverage? Its your choice!
In the end, the decision as to which type of plan to purchase depends on your specific needs and those of your family. While there are pros and cons to each type of insurance, lets discuss the finer points of each option:
Whole life Insurance
Pros: Whole life insurance coverage is in place for the life of the covered individual. As long as you are current on your monthly or annual premium payments, the insurance coverage will remain in place. This makes sense if you require a level of coverage that is guaranteed to be in place upon your passing. For example, if you anticipate sizable estate taxes or other large out of pocket expenses, youll want to ensure that life insurance is in place at all times.
Whole life insurance also begins to accrue a cash value from day one. This means that the actual value of the insurance policy increases as time goes on, and some of this additional cash value may be accessible for you to use as you please.
Cons: Whole life insurance, due to the extended term and guaranteed benefit level, is considerably more expensive on a monthly basis than term coverage. This may make whole life unaffordable to many, and may necessitate a reduced coverage amount that may be less than the recommended insurance amount.
Whole life also provides an opportunity to withdraw some of the cash value that is has accumulated on the policy over time, but this will reduce the death benefit. At your passing, the amount of insurance available to your family may mean the difference between being comfortable or having to still worry about the familys finances.
Term Life Insurance
Pros: Term life insurance generally provides quite affordable premium amounts, and that has made term life a popular choice among the majority of consumers. This factor makes term life insurance a wise choice for those who need to keep the insurance premium to a certain percentage of their monthly budget.
Term life insurance also provides coverage when needed most. You can elect a term that provides insurance coverage during the years where it matters most. For instance, a 35 year old individual with two children would want to have coverage for at least 20 years – or as long as the need to provide financial protection for the dependents lasts. Term insurance allows the insured to discontinue coverage when it is no longer necessary, or to reduce the amount to adjust for family changes.
Cons: Term life insurance does not build any type of cash value amount. The face value of the insurance policy neither increases nor decreases over time.
Unless you choose a level term premium option, the amount of the premium may increase each year. This is important to note as your monthly budget for the insurance plan must remain flexible enough to manage the additional expense.
What is right for you – whole life or term life insurance?
When looking for the best type of life insurance, there are key benefits to both options. However, term life insurance provides one main advantage – affordability. With nearly 40% of Americans today lacking any life insurance coverage, price is a key consideration. The overall benefits of having insurance are worth the modest monthly premiums of term life insurance. Plus – you can elect a term that makes sense given your particular situation. The main benefits of whole life coverage – coverage without any pre-determined end date, and some cash value increases, are only beneficial if you can afford the substantially higher premiums. SelectQuote can help you find, a high quality term life insurance that will provide tremendous benefits for your family, at a price that makes sense for nearly any budget.