Advantages and Disadvantages of Term and Whole Life Insurance
February 22, 2017
Term vs Whole Life Insurance
The two most common types of life insurance policies are term insurance and whole insurance. Each of these has its own set of advantage and disadvantages. There are also a lot of factors that you need to consider before deciding which one will be best for you. If you feel a little stuck on which one to choose or simply want to find out more regarding each, read on through the helpful information listed below! The list includes term vs whole life insurance advantages and disadvantages.
Term – Life Insurance
- Many people consider it to be the easiest and most affordable life insurance to buy
- One can use it as a temporary additional coverage alongside your permanent life insurance coverage
- You can purchase it for specific time periods which makes it extremely flexible
- Later on you can convert it to whole life insurance
- It only pays out if you die within the term policy period
- Only provides a death benefit
- It becomes more expensive with age – especially when you’re over 50
- If you want extended coverage beyond the term initially purchased, you need to renew the whole coverage
Whole – Life Insurance
- People consider it to be a good choice for estate planning
- Whole life insurance provides coverage for life
- It provides death benefit as well as a cash value accumulation build up during the life of the policy
- A portion of the cash value accumulated during the life of the policy can be withdrawn
- A ton of money can be saved if the policy is in force for a considerable period
- One can purchase it without a medical exam (at extra cost)
- The life insurance typically requires a health examination
- It take an average of 12 to 15 years to build up a good cash value
- The life insurance bases the cash value of the policy on how much the return investment of the policy is worth
- Also, initial premiums can be expensive
These are the main benefits and downfalls of term vs whole life insurance.
Factors that need to be considered before purchasing one of these include your current age, your current state of health, the amount of dependants left behind after your death.
Also, the financial needs of your family after your death, what coverage you have in place in case of your death to cover funeral and death expenses. If you have any, current debt and mortgages, the retirement plans you have in place. And also when you plan to retire, your feelings on potentially paying into a term policy and never receiving anything back, etc.
The list of factors is almost endless as you always need to think not only about your current situations but the future as well.
Whole life insurance policies is considered to be your best option when starting out at a young age, but what will suit your needs best will ultimately depend on you.
If you still feel unsure about which coverage plan to choose, consult with a life insurance policy provider. You can discuss all your needs and concerns with them.
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All info was correct at time of publishing