You are not alone if you think life insurance is a confusing concept. It seems like it shouldn’t be this confusing, but it can be. After all, you just pay a premium, and your family receives a benefit when you die, right?
For the most part, that is correct. It’s just a matter of how long you want the benefit to last and how long you want to pay premiums.
Let take a look at the difference between whole life insurance and term life insurance…
What Is Whole Life Insurance?
As its name implies, whole life insurance lasts for your whole life. As long as you pay your premiums, the benefit will be there for your beneficiaries when you die. However, because it will be there no matter how long you live, you will also be paying premiums for virtually your entire life.
Some whole life policies have limited-pay options, but for the most part, you will be paying premiums until age 100 or age 120. See what I mean by paying premiums for your entire life?
One of the biggest advantage of whole life over term life is that a whole life insurance policy accrues cash value over time. Therefore, you can take out a loan on your policy after a few years. The loan will be counted against your face value, so your family will not receive as much of a payout, but at least it is there as an option.
Premiums for a whole life policy tend to be higher than a term life policy, and for good reason. Since the benefit will definitely be paid out, insurance companies have to make sure they have enough money to pay the benefit.
Whole life policies can be great for estate planning and final expense insurance.
What Is Term Life Insurance?
Again, as its name implies, term life insurance is a policy that expires after a certain timeframe, usually somewhere between age 60 and 70. You also only pay premiums until you reach that age.
The reason many people purchase term life insurance is that it is cheaper than a whole life insurance policy, and by the time someone has reached their 60s they may have enough money is savings to provide for their family.
Term life insurance is a death benefit only. There is no cash value that accumulates.
How To Buy A Life Insurance Policy?
There are more details to know when figuring out the difference between a whole life and term life insurance policy, but these are the highlights.
One way to know for sure which option is best for you is to talk to a licensed agent. Look online for agents near you, and get references from people you know. Chances are, you already know someone who sells life insurance.
I’m in north Texas, and one of the companies I like best is Gee Insurance Solutions. They are very professional and knowledgeable, which is what I like in my agents.
Life insurance is a necessity. No, you won’t be around to enjoy it, but it is a great way to leave a lasting legacy with your family.