Term vs. Whole Life Insurance Information

Life insurance is an important component of long-term financial planning. While the loss of a loved one is emotionally devastating, life insurance helps ensure that the financial loss doesn't worsen the tragedy.
What type of life insurance is best for you, though? For many individuals, the question boils down to choosing term life insurance vs. whole life insurance, or some other type of permanent life insurance.

Both term life insurance and whole life insurance pay a death benefit free from federal income tax1 when the insured person dies while the policy is in effect. Let's examine the differences between them.

Term Life: Coverage for a Specified Time
Term life insurance provides coverage for a pre-defined period of time and premiums can be fixed for that period. Depending on the specifics of the policy, the death benefit may stay the same for as long as 30 years.

Whole Life: Protection for a Lifetime
Whole life insurance can span the individual's entire life and may offer cash value and can be "permanent" if the premiums are paid on time as required. The same is true of universal life insurance, another type of permanent life insurance which provides flexible premium features. Term life insurance tends to be less expensive and has lower initial premiums than whole life insurance or universal life insurance, allowing the consumer to buy a larger death benefit temporarily during years when families are raising children, paying for college and paying off mortgages.

Whole life polices can generate cash value over the course of time, as do other types of permanent life insurance. Keeping all this information in mind, make sure to evaluate your individual circumstances such as age and financial objectives when selecting a policy. If you are planning to guarantee a death benefit even if you live to an old age, whole life or universal life insurance is something to consider.

Convertible Term Life Policy
A good option is to buy a term life policy that is guaranteed convertible. When you're younger the term life insurance cost will be lower for a much larger death benefit than whole life or universal life. The long term benefit is that you can upgrade your term policy at a later date without taking another physical exam. You can also check to see if you qualify for better-priced coverage by meeting the underwriting requirements in place at that time. Your needs are likely to change over time and a quality term policy can provide the flexibility to change. Also, if you are certain you only want a policy for, say, 15 or 20 years, term life insurance is a great choice.

Think about your financial goals, too. Are you looking for a simple life insurance policy that just pays out a death benefit and nothing else? Term life insurance may be the answer if simplicity is your goal. Alternatively, are you looking for something with a death benefit you cannot outlive ? If so, whole life insurance, or another form of permanent life insurance, may be right for you.

Finally, consider your budget when selecting a policy and comparing life insurance rates. While whole life or universal life insurance does not expire and allows you to access your policy's cash value while you are still alive, term life insurance may be best for someone looking for the highest death benefit for the lowest life insurance cost.

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