The Difference Between Term Life Insurance and Whole Life Insurance
February 3, 2020
Term Life Insurance and Whole Life Insurance each have benefits
There’s a good chance that you’ve heard about the importance of insurance, because life throws us variables that we simply cannot predict. No one wants to pass away knowing that their family is financially unstable. However, you might not be aware of all of the nuances involving insurance.
There are some very real differences between term life insurance and whole life insurance. It’s important to make sure that you truly understand these differences before purchasing a policy. Here are some facts about both term life insurance and whole life insurance that should help you get a clear view of how different they are.
Differences In Time
The main difference between whole life insurance and term life insurance really isn’t that complicated. As you may have been able to deduce from the title, whole life insurance gives you life insurance coverage for your entire lifetime. As a result, whole life insurance is typically more expensive.
Term life insurance lasts for a specific period of time. The “term” might be five, ten, or fifteen years, for example. Of course, there are longer term life insurance policies that last for twenty and thirty years, as well. Term life insurance may also become more expensive as you age. If you decide to change your mind about the type of insurance you have purchased, you can sometimes convert a term life insurance policy into a whole life insurance policy.
Betting On Your Future
Some people might feel as though a term policy is best for them because they believe that they will be able to increase their income dramatically in a decade or two. Let’s say that you are a musician, and choose to purchase a term life policy. Let’s say that within ten years you become significantly successful. You would be able to self-insure at this point, or might consider a whole life insurance policy for estate planning.
If you are in your 80s or 90s, however, you might be ready to plan your estate. There may be little point in you purchasing a term life insurance policy if you are already trying to get your affairs in order. In this case, a whole life insurance policy makes the most sense.
Long-Term Goals
You might have different motives for purchasing life insurance. For example, some might purchase life insurance because they started a family and want to make sure that their loved ones are financially stable when they pass away. Another fact about term life insurance is that it’s a bit more flexible - you can cancel a policy and shop for a new one at any given time. However, the premiums might vary in terms of cost.
However, you might also be someone who is already well-off. In this way, a whole life insurance policy can actually be used to pay the estate tax after your death, so that your assets can be passed on accordingly. It can basically be used as a savings vehicle, but it might not be the best choice for those who are not financially stable.
Have more questions about different types of life insurance and what is best for your specific situation? Stop by and see us today or feel welcome to give us a call 607.734.8799.
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