Life insurance is a great way to make sure your loved ones are financially secure should something happen to you, but as you start exploring your life insurance options, you’ll have to make a big choice at the start of your decision-making process: term life insurance or whole life insurance?
Whether you’re considering one or the other, here you can learn some of the differences between them.
What is term life insurance?
Term life insurance is the most affordable way to protect your family’s financial security if something were to happen to you. As the name suggests, you have the option to choose your term length and only buy it as long as you need it. The term lengths typically available are 10, 15, 20, 25 and 30 years.
Benefits of Term Life Insurance
For many people, term life insurance is an excellent way to create financial protection for loved ones and others who depend on your income. There are a number of benefits that come with purchasing a term life insurance policy, but a few include:
- Flexible payment options
- Fixed premiums
While term life often is the less expensive way to secure your family’s financial future, depending on your needs, there may be some additional considerations for choosing a whole life policy over a term life policy.
What is whole life insurance?
Whole life insurance is a type of permanent life insurance that provides a set amount of coverage (decided by you) for as long as you live, for which you pay monthly premiums. When you purchase whole life insurance, you also designate one or more individuals—called beneficiaries—to receive the policy’s death benefit when you pass away.
Benefits of Whole Life Insurance
Whole life insurance has three distinguishing features:
- Lifetime coverage – Whole life insurance provides coverage for a lifetime.
- Set premium – The premium for whole life insurance never changes and is also referred to as a level premium. What you pay for the first month is what you’ll pay for every month the policy is in force.
- Cash value – As your premiums accrue, and at a time specified by the insurance company, you can borrow against your whole life policy’s cash value. However, if you pass away before paying back the loan, the benefit paid to your beneficiaries will be reduced. You also have the option to cancel your policy, end your coverage and receive part or all of the cash value.
Understanding the ins and outs of life insurance can be challenging, but SelectQuote can help you sort it out. We’ll help you understand the differences and the advantages of term life vs. whole life insurance and we’ll take the time to find the coverage that best fits your needs and budget.