Guest Post by Jason Fisher
Life is filled with the unexpected. When you buy life insurance, you can rest assured knowing your loved ones are protected no matter what happens. While most people agree they need life insurance, there is an age-old debate about which type of policy is best: term life or whole life.
Although the concept of permanent life insurance is appealing, is it worth the cost? And do the benefits of term life insurance make it the best choice for everyone. To decide whether term or whole life insurance is right for you, you need to identify your needs and understand some key differences between the two policies.
Let’s start by breaking down term life insurance. Term life insurance offers coverage for a certain period, or term, of life. These policies come in terms like 5, 10, 15, 20, and 30 years.
If you’ve faithfully made payments and pass away during the term, your beneficiaries will receive the death benefit, or face value, of your policy. Your premiums and the face value are locked in for whatever duration you choose. Once your term is up, though, rates on a new term policy may change based on your age and other risk factors.
Here are a few situations when term life insurance is a good fit:
Whatever your situation, you can base the terms of temporary life insurance around your family’s ever-changing financial needs.
Unlike term life insurance, whole life insurance is permanent. True to its name, whole life insurance is designed to provide protection for the entirety of your life, rather than a specific period.
In addition to the length of coverage, there is another key difference between term and whole life insurance: cash value. Whole life insurance is considerably more expensive than term life insurance, because it offers more than just a death benefit your loved ones will receive in the wake of your passing.
Your premiums also go towards the policy’s cash value, which grows tax-deferred over the years. You can also borrow money from the cash value, much like a retirement account. Just keep in mind that you’ll have to repay the loan with interest to keep the full death benefit of your policy intact.
You are also entitled to the policy’s cash value if you ever have to surrender your policy.
Term life is a no-brainer for most families, but whole life insurance may be better suited to some people’s needs.
Consider whole life insurance for the following:
As you can see, there’s no one-size-fits-all solution to life insurance. While the benefits of term life insurance make it the best fit for most people, everyone’s situation, financial needs, and goals are different. Sometimes, people need the permanence of whole life insurance.
Whatever type of life insurance you decide on, don’t delay making this all-important purchase. Life insurance is one of the most concrete ways you can protect your family, and there’s no time like the present to get a policy in place.
Jason Fisher is the founder and CEO of BestLifeRates.org, and a highly-trained life insurance agent licensed across the country. He has helped thousands of families find affordable life insurance, from basic plans up to comprehensive estate plans, and everything in between.
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