You have two main options when choosing life insurance coverage: term life and whole life policy. But which one is the best for me? Here, we’ll briefly examine the differences between term life and whole life policy.
What Is Term Life Insurance?
Term life insurance is a type of policy that covers a specific time. If you get a 30-year policy, you’re covered for that 30-year term. Your beneficiaries will get a payment if you die during your coverage.
What Is Whole Life Insurance?
This policy covers your whole life. Whole life policies are more expensive than term life insurance because they serve as an investment account and build cash value.
Pros and cons
Term life insurance
Pros
- No hidden fees, or investment risk
- Less expensive premiums
- Can cancel the policy without any penalty
Cons
- You have to get another new life insurance policy when coverage expires
Whole life insurance
Pros
- Can be helpful in estate planning
- Coverage doesn’t expire
Cons
- Penalties apply if you cancel coverage
- Offer higher interest rates
- Higher premium rate
What Option Is Best For You?
Your financial needs will determine whether you need whole life or term life insurance policy. Whole life insurance may be right if you have long-term dependents or you want to build cash value, and a term life insurance policy may be right for you if you’re looking for an inexpensive way to leave a death benefit behind.
If you’re still unsure, you can get in touch with a life insurance expert to help you compare and decide which type of life insurance policy is right for you.