The type of life insurance you purchase is dependent on your personal finances and what you want from life insurance coverage. Whole life insurance is so named because it is designed to cover the entire course of one’s life. Term life insurance is for a set time period, usually from 10 to 30 years. Technically, you can get term life for one year, but that is rare.
Whole life is usually considered an insurance and investment because part of the premium accumulates what is called “cash value” in addition to the death benefits. The cash value builds over time. As such, it is like a savings plan. Because of this feature, whole life insurance costs considerably more than term life insurance. There are many options that can be added to a whole life policy, including a “cash out” option in which a policy can be cashed-in at a later date.
In its simplest form, term life is essentially straight life insurance without a cash accumulation feature. Therefore, term life is less expensive than a whole life policy even though the death benefit value is the same, depending on the dollar amount you select.
In many instances, term life is perfect for young couples starting a new family and for single parents that want to provide security for their child or children. Couples and single parents can find it difficult to fit the expense of a whole life insurance policy into their budget. Term life is an affordable means of providing a safety net for your family.
As an addition benefit to many policies, most term life policies are “convertible,” meaning that you have the option of converting your term life policy into a whole life policy without penalty. Many policies have many other options that can be added to meet your needs.
While a lot of young people prefer term life insurance because of its lower premiums compared to other life insurance policies, it is important to research before you buy. Ensure you understand what you are getting into. Remember that cheaper is not always better. You should take the time to research, get quotes, and compare policies and services before you make up your mind.
