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Did you know that nearly forty percent of Americans don’t have life insurance?
While it can be difficult to think about passing away, your dependents rely on you to care for them, in life and in death. Secure their financial future by taking out a life insurance policy that will cover their living expenses in case you’re no longer there to provide for them.
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If you’ve already decided to get a life insurance policy, you may be wondering if you should get whole vs term life insurance. Each of these types of insurance has its own benefits. Keep reading to learn which one is best for you.
What Is Term Life Insurance?
Term life insurance is a type of insurance that lasts for a single term of your life. Generally, these policies can be taken out for 10, 15, or 30-year terms.
This kind of policy is great for when you have a short time frame in which the benefits of the policy would be of value to your beneficiaries. Often, people will take out term life insurance when they have children, send their kids to college, or have other dependents who rely on their income for their basic needs.
When you pay for a term life insurance policy, you pay a set premium for each month, regardless of how your health or life circumstances change throughout the term of the policy. At the end of the term, if you choose to renew your policy, your premium may increase.
What Is Whole Life Insurance?
Whole life insurance, as the name implies, is insurance that carries with you your entire life. Your premium is decided when you first sign up for the policy, and as long as you stay current on your payments, your premium will stay the same throughout your life.
Because of this feature, a whole life insurance premium tends to be more expensive than a term life insurance premium for comparable coverage. However, a whole life insurance policy also has a benefit that term life insurance doesn’t: accrued cash value.
With a cash-value life insurance policy, you contribute to a cash fund every time you pay your premium. Over time, this cash value grows larger, giving you a fund that you can draw on as you age or reinvest into the insurance policy.
Which Should You Choose?
Which of the two life insurance types you should choose depends on your life circumstances and your financial goals.
If you’re starting a family and want to make sure that your children are taken care of no matter what happens to you, term life insurance might make the most sense for you. It’s the more affordable option and will last until your kids are out of the house and starting their own lives.
On the other hand, if you’re young and looking to build financial wealth for yourself and your descendants, a whole life insurance policy might make more sense. Lock in your premiums now, and as you age, you’ll see a great return on your investment.
You can also convert certain kinds of life insurance to other types if the need arises. For example, with Paradigm Life you can shift your military life insurance to whole life insurance when it makes sense for you and your family.
Whole vs Term Life Insurance: Choose Wisely
Now you know the key differences between whole vs term life insurance and the benefits of each. Depending on your health, family structure, and financial goals, one or the other might be the better investment for you.
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