With so many factors to consider, shopping for life insurance can easily become overwhelming. A simple place to start is deciding the type of policy you’re looking for. The two primary types of life insurance, term life insurance and whole life insurance, have different advantages and considerations to keep in mind when deciding which is right for you. Let’s walk through the key differences between term life and whole life insurance.
Understanding the Difference Between Term and Whole Life Insurance
Term life insurance is one of the most popular types of coverage due to its flexibility and affordability. With term insurance, you only buy as much coverage as you need, making it more affordable than whole life insurance. Common term lengths typically range from 10 to 30 years.
Whole life insurance, on the other hand, is meant to cover you for your entire life. While this policy type is usually more expensive, it’s a good choice for those whose circumstances and financial goals align with long-term coverage. As long as you continue paying your premiums, you’ll be covered for the rest of your life, so you’ll never have to worry about finding a new plan once your coverage expires, and you won’t have to undergo additional underwriting or a new medical exam during your lifetime once your rates are locked in.
How do the life insurance costs compare?
In general, term life insurance is more affordable, making it the more popular option. With term life insurance, it’s easy to create a financial safety net for you and your family at a price you can afford. Term life insurance also provides many options to customize your plan. You can choose not only the length of term, but your benefit amount as well, and because you only pay it for as long as you need it, term life insurance costs considerably less than whole life insurance.
With whole life insurance, your policy often includes a savings component, meaning each time you pay your premium, a certain percentage goes toward a tax-deferred savings component known as the cash value. This cash value earns interest and grows over time. Policyholders are typically able to borrow funds to help support additional financial needs, such as college education costs or medical expenses. However, your premium on your whole life policy will remain the same as long as the policy is in force.
Life insurance is meant to replace your income in the event of your death. Therefore, it’s important to think about how much coverage your loved ones would need. Consider your current and future expenses, such as a mortgage, future college costs, supporting dependents, end-of-life expenses, and any additional financial cushion that might be beneficial to your family.
Which type of life insurance is right for me?
For many people, term life insurance is a good fit due to the affordability factor and flexibility in determining the term and level of coverage.
Term life insurance might be right for you if:
You’re the primary wage earner for your family and are looking to protect them if your income is lost.
You’re a stay-at-home parent looking to help cover the cost of childcare.
You have a mortgage that would need to continue to be paid.
You have any debts, including credit cards or student loans.
Whole life insurance might be right for you if:
You have a high net worth and are looking to support your family in paying estate or inheritance taxes if you were to pass away.
You’re the parent or guardian of a special-needs child and want to make sure they have the financial resources they need.
You are looking to provide an inheritance for your loved ones after you’re gone.
SelectQuote Can Help You Find the Right Life Insurance Coverage for You
No matter what your circumstances are, SelectQuote can help you find the right life insurance. We’ll take the time to learn about your unique situation, offer guidance about what policy type may be right for you, and then gather unbiased quotes from trusted carriers in just minutes. Don’t delay getting your loved ones the protection they need—reach out to us today.
