Life insurance can be an incredible benefit in the wake of an untimely death or possibly a financial need. However, it takes knowing which insurance to buy in the first place to really benefit your estate planning. Here is a guide to selecting whole life insurance or term life insurance.
Difference Between Whole Life Insurance and Term Life Insurance
It seems like there is always something else to buy as an adult–some of which seems unnecessary. However, when it comes to life insurance, you don’t want to skip making this purchase. Before agreeing to anything, make sure you research the difference between whole life insurance and term life insurance.
Term Life Insurance
Term life insurance is coverage sold in different term lengths such as 10, 20 and 30 years. This coverage exists to cover the expenses of the family if the policyholder dies. The policy will expire, unlike whole life insurance, and you may never see any death benefits from it if the policyholder outlives the policy. If you are young and in good health, you can usually get a really good rate for term life insurance.
This is a good option when it’s coupled with a strong financial plan. This kind of insurance is a bridge to cover major loss when there isn’t a robust savings and retirement portfolio yet. Generally, a younger couple or family will have been steadily saving and be in a different phase of life when the policy ends.
Whole Life Insurance
According to Investopedia, “Whole life insurance provides policyholders with the ability to accumulate wealth as regular premium payments cover insurance costs. These payments also contribute to equity growth in a savings account. Dividends, or interest, can build up in this account, tax-deferred. As indicated by its name, whole life insurance protects an individual for his entire life. This is the most basic type of whole life insurance, also known as straight life, traditional or permanent whole life insurance.”
Whole life insurance has some perks over term life insurance, but they aren’t meant to best each other. They serve different purposes. This is recommended for those who might need asset or tax protection or want the security offered by this type of policy, according to U.S. News.
Speak with a financial adviser, and conduct your own research as you look into life insurance policies. Remember to keep your goals, needs and priorities straight while talking to any sales reps.