Term Life Insurance vs. Whole Life Insurance: Which Should I Choose?
Which life insurance to choose is a highly personal decision based on many factors. Nonetheless, it is impossible to decide which product is best without fully understanding the differences. Here is a guide to both term and whole life insurance, along with the advantages and disadvantages of each. With this knowledge, you will be able to work as a team with your insurance agent to choose the life insurance that is best for you.
What Is Term Life Insurance?
Term life insurance is a relatively new product that began sweeping the insurance industry in the 1980s. The premiums are significantly lower than whole life insurance premiums, there is no extra cash value, and the product is easy to understand.
Term life insurance is purchased for a period of time, such as 10 years, 15 years, 20 years, 25 years, or 30 years, with one insurer currently offering a 35-year term. Your premium is the same each month during the term that you choose. For example, the cost of a 30-year term plan is guaranteed to remain level for 30 years. If you die during the term, your beneficiary receives the full amount of your policy. If you die after the term, and you have not renewed or converted your policy, there is no payout.
Nowadays, there are also term life policies that will pay benefits while you’re still living if you suffer a critical or chronic illness. There are also Return of Premium term policies that will pay you back all of the premiums that you paid into the policy if you’re still living at the end of the term. [Read more…]