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050222 Whole vs. Term Life Insurance… How to Decide What's Right for You

Life insurance is a way to protect your beneficiaries from falling behind

financially in the event of your untimely death. But depending on the type

of policy you take out, life insurance can do much more than provide a

theoretical financial safety net. For example, whole life insurance provides

a guaranteed cash payout that you may be able to tap into while you're still

alive. 

 

But whole life insurance is much more expensive than traditional term life insurance,

which simply grants a death benefit to your loved ones if you die during the set term. 

Term and whole life insurance come with their own benefits and drawbacks, and the

type of policy you need depends on how you plan on using it.

Keep reading to learn more about the differences between term and whole

life insurance. 

 

What is term life insurance?

 

Term insurance is a traditional type of life insurance in which the policyholder pays

in premiums for a set period of time. If they die before the end of the term, then the

beneficiary receives the death benefit payout from the life insurance company. 

 

Duration: Up to 30 years

Cost: $25 to $35 per month

Death benefit: Yes

Cash value: No

 

The primary goal of a term policy is to keep your loved ones financially protected

in the event of your untimely death. A term life policy will help your beneficiaries

cover funeral costs, stay current on your mortgage, pay off any debts in your name

and cover living expenses without your income. By the time your term expires, 

you would in theory have fewer financial obligations and less of a need to support 

your beneficiaries if you were to pass away. 

 

Term life insurance premiums offer relatively affordable coverage but they

may change over the course of your policy. Whether or not your premiums

will rise depends on the type of term life insurance policy you have. 

 

What is whole life insurance?

 

Whole life insurance is a life insurance policy that lasts your entire life, and as a

result, it can be much more expensive. Whole life insurance and other types of

permanent life insurance can cost up to 15 times more than term life insurance,

according to 2021 Policygenius data. But whole life insurance has the benefit of

a guaranteed cash value that you can tap into while you're still alive, which makes 

it more of an investment than term life insurance. 

 

Duration: Your lifetime

Cost: $20 to $240 per month

Death benefit: Yes

Cash value: Yes

 

Similar to term life insurance, you would only pay premiums on a whole life 

insurance policy for a set period of time or up until a certain age. The difference

is that you're able to retain the value of a whole life insurance policy after you're

done making payments.

 

Whole life insurance premiums are much higher than term life insurance premiums

but they typically stay level throughout the policy. The cash value of a whole life 

insurance policy earns interest at a low, predetermined rate.

 

It's not the most lucrative type of investment but it comes with a guaranteed payout

compared with a term life insurance policy. Keep in mind that if you withdraw from

the policy early, you run the risk of surrendering the policy's cash value. 

 

How to decide between term and whole life insurance

 

A term life insurance policy is sufficient for most consumers who simply want

to protect their loved ones from financial trouble in the event of their untimely death.

By the time your policy expires, you would theoretically have an alternative way of 

supporting your beneficiaries in the event of your death.

 

Whole life insurance comes with higher premiums but it's treated more like an

investment due to the fact that the policyholder can build cash value.

While the return on a whole life insurance policy isn't significant, it can be a

worthwhile choice as long as you can continue paying the premium throughout the

duration of the payment period. The cash value of a whole life insurance policy is

commonly used by policyholders to pay for an estate tax upon their death, for

example. 

 

If you're unsure of which type of life insurance coverage you need, contact a

Trusted agent who can provide the proper options for your financial situation.

 

Author: Erika Giovanetti
Source: © 2022 FOX News Network, LLC
Retrieved from:
FINRA Compliance Reviewed by Red Oak:

https://fflheartland.advisorprofiles.com/article/527800

 

Hayden Childs

Alabama Licensed Agent

(205) 269-1382

www.haydenchilds.net

I STILL MAKE HOUSE CALLS! 




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