There’s a lot to consider when it comes to shopping for life insurance and it can feel intimidating at first. A simple place to start is determining what kind of life insurance you’re looking for. The two main types of life insurance are term life insurance and whole life insurance, both of which have advantages and considerations. Before making a decision, it’s best to understand the key differences between term life and whole life insurance.
What’s the difference between term and whole life insurance?
Term life insurance is one of the most common ways to protect your family’s financial security if something were to happen to you. With term insurance, you have the option to choose your policy length and you only buy it for as long as you need it. Generally, it’s the less expensive option between term and whole life insurance. Typical length of term options are 10, 15, 20, 25 and 30 years.
Whole life insurance, on the other hand, is designed to last for your entire life, rather than a specific period of time. While generally more expensive, depending on certain goals or circumstances, it could potentially be a good fit. As long as you continue paying your premiums, you’ll be covered for the rest of your life with whole life insurance.
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 was 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 when you pass.
SelectQuote Can Help You Find the Right Life Insurance Coverage for You
No one knows your financial situation and life insurance needs better than you, but we can help make the process quicker, easier, and more convenient for you. We’ll get to know your needs and quickly compare the different types of coverage and rates available to you. In just minutes, we can provide you with unbiased, personalized price comparisons from some of the most trusted insurance companies in the industry.