Term vs. Whole Life Insurance: Which is Right for You?

Life insurance is there to provide income for your family when you die, which is why it’s important to know and understand the different life insurance options available to you.  The two most common, and debated, forms of life insurance are term life insurance and whole life insurance.

Life insurance is one of the most important investments you can make for the future security of your family. It is the best way to ensure they have the money they need, regardless of what happens to you. When you’re shopping for life insurance, it can be a confusing process. There are several different types of insurance coverage and hundreds of companies you can choose between.

Have you considered how much life insurance you need? Sometimes the amount itself is the determining factor!

This article is going to explore the advantages and disadvantages by comparing term and whole life insurance policies. Each plan is an excellent option or insurance coverage, but every family is going to need different types of coverage based on their needs. It’s vital you understand all of the options for insurance coverage.

Comparing Term vs Whole Life Insurance: Which Is Right For You?

The truth is, as much as most of us don’t like whole life, there really are situations where it’s needed. They’re just far and few between. Either way, let’s take a look at each type so you can evaluate your own situation.

Term Life Insurance

Term life insurance is a policy with a specific end date. As long as you pay the monthly premium, your policy will remain in effect until you reach the policy end date.

Common terms include 10, 15, 20, and 30 year life insurance policies. When the end of the term is reached, you may or may not have the ability to renew, depending on the company, your health, and other factors. If you are able to renew your insurance policy, the premium will typically be higher because the policy will extend through an older age.

Pros and Cons of Term Life:

• Lower premiums. Term life insurance is usually the least expensive policy.
• Full payout. Another advantage is the beneficiary will receive the full amount of the policy if you die within the term.
• Term limit for policy. Term life insurance policies are just that – for a set duration of time, often ranging from 5-30 years. The positive aspect of the term limits is knowing how much your policy rates cost. The downside is you may not be able to renew, and even if you do renew once the term is up, the cost will most likely increase.
• No cash value. Another downside is, unlike whole life insurance, you won’t build up cash you can borrow against down the road.

Whole Life Insurance

Unlike term life insurance, which has a specific expiration date, whole life insurance is guaranteed for the life of the insured person. Also known as permanent, or cash value insurance, whole life insurance premiums will never increase because you age.

Pros and Cons of Whole Life:

• Stable premiums. One of the biggest pros to whole life insurance is you’ll never see an increase in your premium. What you pay today is what you’ll pay 20 or 30 years from now. And as long as you continue to pay your premiums, your beneficiary will receive the benefits upon your death.
• Cash value. Whole life insurance also has a cash value. You gain interest as the cash value increases. Interest growth is tax deferred, meaning you don’t pay taxes on the income while it remains in your policy. If you cash out your whole life policy you will pay taxes for any cash amount above what you put in.
• Higher premiums. One downside to whole life insurance is the premium is usually higher than term life insurance, and can stop a lot of people from getting life insurance.

What about life insurance as an investment? Some people claim whole life insurance is a better option than term life insurance because it has cash value and can serve as an “investment.” In most cases, whole life insurance is not a good investment, despite what some people may tell you. But there are a few scenarios where it makes sense.

These are the two main types of insurance coverage you can choose between, but inside of these two types, there are several other variations where each has different benefits. For example:

• Universal
• Variable
• Indexed
• Survivorship

There is no “one-plan-fits-all” which will work for every applicant. You will need to explore all of the options and weigh them based on your life insurance preferences. Regardless of which type of plan you choose, it’s important you give your family the coverage they will need. Having a less than perfect plan is much better than having no life insurance coverage at all.

Getting Affordable Insurance Coverage

Regardless of which type of life insurance you choose, either whole or term, it’s important you get the cheapest premiums available. There are several ways you can get affordable insurance premiums. Making a few changes could save you hundreds of dollars on your insurance coverage.

If you’re listed as a chewing tobacco user or a smoker on your application, then you should prepare to see much higher monthly fees for your insurance protection. In fact, smokers are going to pay, at minimum, twice as much for life insurance versus what a non-smoker would for the same sized plan. If you want to save money, it’s time to kick those cigarettes, once and for all.

Before the insurance company accepts your application, they are going to require you to take a medical exam to determine how much of a risk you are to insure. The better your health, the better your insurance premiums are going to be.

If you want to save money, it’s time to start going to the gym and skipping the extra dessert. A healthy diet and regular exercise are both excellent ways for you to lose weight, lower your cholesterol, and reduce your risk of being diagnosed with severe health complications. Lacing up those running shoes could cut your insurance premiums in half, which means more money in your pockets.

The best way to ensure you’re getting the lowest premiums is to get lots of insurance quotes before you decide which one is going to work best for you. Every insurance company is different, which means you could get drastically varying rates depending on which company you get the quote from.

Instead of wasting your time calling dozens of companies yourself, let one of our independent insurance agents do all of the hard work for you. Unlike traditional agents, we work with dozens of highly rated companies across the nation, which means we can bring all of the lowest insurance premiums directly to you, without the hassle of having to call the companies yourself. Working with an independent insurance agent can save you both time and money on your life insurance search.

Life Insurance Can Protect Your Loved Ones

When comparing term and whole life insurance policies, the bottom line is life insurance in any form can help protect your family in the event of your untimely death. When considering how much life insurance to buy, consider the costs of any debt you may have, including a mortgage, consumer debt, medical bills, etc. Then factor in additional living expenses for your spouse and family.

Contact an insurance agent or financial professional for life insurance advice or to learn more about term life insurance versus whole life insurance, and more specifically, which one is best for you and the needs of your family. Be sure to shop around for insurance policy quotes before making a purchase; life insurance rates may vary widely from company to company.

We have years of experience working with all kinds of applicants across the country. We know deciding which policy type works best for you can be a confusing process, but it doesn’t have to be. We can walk you through the process to ensure you’re getting the best protection for your family.

If something tragic were to happen to you, and you didn’t have life insurance, your loved ones would be left with all of your debts and other final expenses. Losing a loved one is never easy, but being responsible for a mountain of debt is going to make the process more difficult. Because you never know what’s going to happen tomorrow, you shouldn’t wait any longer to get the insurance coverage your family will need.

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