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The Differences Between Term And Whole Life Insurance

One of the main choices you will have to make about your life insurance policy is whether you will go with a term or whole life policy

. The differences between the two are important to understand since each one offers you something different. You will find advantages and disadvantages to both options. You will have to decide which type of insurance is the best for your particular situation.

Term Policies

Term life insurance is the lowest costing type of insurance. It provides you with coverage for a set period of time. At the end of that set time period your coverage is over. If there is no claim made on the policy then you do not get any money from it.

The reasoning behind this limited coverage is simple. Most people get insurance in case they die early, meaning that they die before retirement while their children are still young and their families relies upon their income for support. It is reasonable then that as a person gets older and their children grown up that they may not need the insurance. Also once a person reaches retirement they generally have no debt or only a small amount of debt and they are collecting on retirement funds that they have put away while working. If this is your situation then a term policy would suit you just fine. You would have the coverage there when you need it and once you no longer need it then you can simply let the policy end.

Whole Life Policies

A whole life insurance policy is more expensive than a term policy. It also is a permanent policy, which means it will last your lifetime as long as you stay current on your premium payments. It also accrues cash value. This allows you to borrow from it if the need should arise. It is an asset that actually has some value for you while you are still alive.

Whole life policies involve a pricier premium because you are paying for the insurance coverage and towards the value of the policy. With every payment you make a portion goes towards your coverage and another portion is invested and becomes the cash value of the policy that you can borrow.

Whole life policies are nice since they do have cash value. However, if you cancel a policy within a certain time you could have to pay penalties. You also may find other options of getting money, like through a persona loan, are much cheaper in the long run than a whole life policy.

When it comes to choosing term or whole life insurance, you really must think about your situation. Consider your needs and your family's needs. Take time to consider the pros and cons of each option. You want to be sure that whatever you choose is the right choice for you and your family.

by: John Kirzno
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