Deciding between insurance policies is never an easy or fun task, especially when you are working on the tough to face policies like life insurance. How do you know which life insurance policy will be the best for your family after you are gone? Learning the difference between term and whole life insurance, the two main types, will help you make a decision on which policy is best for you.
What is Term Life Insurance?
Term life insurance provides the most affordability since, as the name suggests, it is for a term period. Term life insurance options will provide coverage for a certain period of time, ranging from one year to 30 years depending on your policy. When you choose term life insurance, it is very straightforward – you get the death benefit you paid for and that is it. If you die during the period of the term life insurance coverage, your beneficiaries receive the death benefit. If you die after your coverage period has ended, then your beneficiaries will not receive anything. There are some difficulties to securing term life insurance, especially if you are over the age of 80.
What is Whole Life Insurance?
Whole life insurance is a policy you will always have once you enroll in it. It does not end after a certain period of time. Once insured, you will receive a guaranteed cash value for your policy that beneficiaries will receive when you are gone. Depending on the policy and provider, you also have the option to receive dividends for an increased death benefit.
What is the Difference Between Term and Whole Life Insurance?
The biggest difference is the time period you are insured for each. Term life presents limitations of when you can be insured and the money you pay for the insurance disappears if you pass the period of your insurance. Whole life insurance will always be available to your beneficiaries no matter when you pass. Whole life also provides opportunities for additional cash in your death benefits. Term life is a good option if you are going to doing a dangerous job for a few years and want that in addition to a whole life policy, but generally term life insurance is not the best single solution.
Bonus Education: Final Expense Insurance
If you choose a whole life insurance policy, you have the option with most providers to add a final expense policy. This allows you to choose a benefit amount that your family receives additional to your death benefits. Often this amount is used to pay for funeral expenses or remaining hospital bills.