Term vs Whole Life Insurance
There seems to be a raging debate going on over life insurance: term or whole life? Which do you have? Which should you have? Which will serve your family better in the long run? These are questions which only you (and probably a licensed financial planner) can decide, but beware, the price for choosing the wrong vehicle can be high.
Life insurance was originally created to provide means to those who depend on you for means until they can do it themselves—typically your kids. For that purpose, term life insurance was created and has served its users well.
To compare term insurance vs whole life insurance, we need to know a little about each of the types of policies.
Term life insurance is simple: you pay regular premiums so that if you die while the policy is in force, your beneficiaries get the money they need to survive without you. The term on this simple insurance is generally anywhere from 10 to 30 years. If you have a “level “ or “fixed” premium policy, your rates will stay the same throughout the life of the policy (typically 20 years). If your policy renews annually, rates will go up as you age or your health declines. The policy only pays out if you die during the term of the policy.
It is difficult to get term insurance as a person passes 50 years old. Most policies will not extend past age 75.
Whole life insurance, on the other hand is life insurance with a savings/investing component built in. If you have a whole life policy, you not only get a guaranteed death benefit, but you will also be accruing cash that you can withdraw eventually—this is the “cash value” you’ve heard of and it’s generally equal to or much more than the premiums you paid over the life of the policy. The gains you make in the savings component of whole life insurance are tax deferred if you cash out during your life, but are generally tax free to your beneficiaries after you die.
The premiums of a whole life policy are usually fixed. They are also more expensive than term life premiums. Because you are paying for life insurance as well as for an investment, you pay more. Also the fees and commissions of a whole life policy are very high and eat up much of your premium, especially the first year or so.
So, how do you decide in the whole life vs term life insurance debate? Everyone’s situation is different, and with the cost of whole life as high as it is, a mistake in life insurance, can be a costly one. Do your research. Compare term vs whole life online and with a trusted financial planner. Take the time to run the numbers and read the fine print. And, as always, go with a highly rated insurance company.
More posts on this subject:
Related posts:
- Whole Life Vs Term Life Insurance
- Term and Whole Life Insurance
- Difference Between Term and Whole Life Insurance
- Term Versus Whole Life Insurance
- Term or Whole Life Insurance
Tags: compare term vs whole life insurance, term insurance vs whole life insurance, term vs wholel ife insurance, whole life vs term insurance
