Life insurance can be confusing. The key to knowing which policy to take is finding all the information you can about the policy so you can know hic suits your lifestyle better. When your take the wrong policy, it could impact your financial status or create a financial barrier for your family or beneficiaries when you die. There are two main life insurance policies, term life insurance and whole life. So what are the differences?
Length of coverage
Term life insurance policies depend on the terms of the service provider while whole life insurance polices cover you until you die. Most life insurance service providers have policies of between 5 to a 30 year plan for term policies. You can renew your term policy by paying a premium amount that is set by the insurance company. When you take up a whole life policy you make the payment once.
The term policy is the easiest to get and is more affordable to people with many financial responsibilities and commitments. Getting a term policy is way cheaper at the beginning compared to getting a whole life insurance cover. When your term policy is about to expire, you could get another policy but it is cheaper to pay the premium. Each premium you pay is higher than the previous one. In the end your total on the term policy could be bigger than the whole life depending on the policy you chose
Most term life insurance policies do not apply a cash value. Your family won’t be eligible for a payout when you live through to the end of the term insurance policy. With whole life insurance, you can use your cash value as an investment. The cash value can be used as a retirement fund, mortgage or debt payment.
The policies of your term insurance can be changed for many reasons. If you are facing a financial crisis, want to upgrade or downgrade to another policy, want to change the beneficiaries and are concerned about the policy, term insurance providers can allow you to change the policy. A whole life insurance policy is permanent; you cannot change it no matter what
A term insurance policy is limited to the death benefit while the whole life insurance can cover other areas. The money in your term life insurance policy is only there to provide death benefits to your beneficiaries provided your death was within the time frame of your insurance. in case you die before making a premium adjustment to your term policy, any claim from your beneficiaries will not be paid. The money in your whole life covers your death benefits and cash value. When you die the cash benefits are given to your beneficiaries. Permanent insurance comes with a life-long protection so the beneficiaries will receive they payments in whatever circumstance.
Your life insurance should not replace your other financial needs. If you cannot afford a policy, do not forgo your other needs. When it comes to choosing between a term life insurance policy and a whole life policy, you should consider what is best for your needs.