Term v.s Whole Life Insurance

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Shopping for life insurance can seem overwhelming. One thing to decide when you start shopping is: do you need term life insurance or whole life insurance? Both have their pros and cons and it’s important to understand them when moving forward with purchasing a life insurance plan so that you can make the decision that is best for you!

Term Life Insurance

Term life insurance is a popular choice among most people since it is both affordable and straight forward. It’s beneficial to go with a term life insurance policy if you’re looking to budget considering there aren’t any additional fees or maintenance. It’s also helpful if you’re just looking to cover the expenses for your family. With term life insurance, as a policyholder, you will pay premiums regularly and if something happens while the policy is in effect, your beneficiary/beneficiaries will receive a death benefit. The thing to remember with a term life insurance policy is that they are only set for amount of time which if you’re looking to build wealth as you age and are not worrying as much about a financial safety net, will be helpful.

Pros:
Easy to understand, with no hidden fees or risks
Affordable
You can cancel the policy before it expires without losing value

Cons:
If the policy expires, your coverage will as well. If you’re still wanting insurance, you’ll have to shop for a new policy.

 

Whole Life Insurance

A more permanent life insurance policy would be a whole life policy, which stays in effect as long as you’re paying the premiums. This means that you’ll always have a financial safety net. It’s a bit more complicated to understand but the one thing to know with whole life insurance is the cash value that can come with a whole life policy. Whole life insurance policies combine insurance and investing, which most people like to keep separate. The payments you make toward your premiums are split between the death benefit for your beneficiary or beneficiaries and cash value. As the policy goes on, the death benefit will shrink and the cash value area will grow until it’s entirely made up of the cash value. Due to this, these policies can be much more expensive.

Pros:
Doesn’t expire
Good for estate planning and investing
Forces you to save money

Cons:
Expensive
The interest rate of the cash value is more than likely going to be less than if you invested it in other ways
More complicated to understand

Still wondering which policy will be right for you? We’re here to help! Give us a call today! (205) 783-5893

Resource: https://www.policygenius.com/life-insurance/learn/whole-life-versus-term-life-insurance/

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