So, you’ve decided to buy life insurance, but you’re confused about whether you should opt for a term insurance policy or a whole life insurance policy. Here’s a quick guide on the difference between these two types of policies.
Term Life Insurance
For most people, a term insurance policy will suffice, given that it offers adequate coverage at an affordable price. Here’s what you need to know about term insurance.
- Term insurance lasts for a specific number of years, usually a period ranging between 5 and 30 years.
- If you pass away during the policy term, your beneficiary will receive a payout, called the death benefit, from the insurance company.
- Once you reach the end of the term, your policy will simply cease to exist unless you extend it.
- Your annual premium usually remains constant for the duration of the term.
- How much you pay for the policy will be based on factors like your health, age, the coverage amount you choose, and the policy term.
Whole Life Insurance
Whole life insurance offers you two benefits – life insurance coverage and a cash value. Here are a few things that you should know about whole life insurance plans.
- Part of the premium you pay goes toward building your cash value.
- Due to this, whole life insurance policies are more expensive when compared to term insurance policies.
- You can borrow against the cash value in your account or surrender your policy and withdraw the cash value.
- As the name suggests, the policy also lasts for life. No matter when you pass away, your beneficiaries will receive the death benefit.
- Your premium stays the same till you pass away or cancel the policy.
Which Is The Right Choice For You?
Most people can make do with a term insurance policy alone. It makes sense to buy a term insurance cover, especially if you don’t want to spend too much. However, if you would like to buy a policy that also serves as an investment tool, you may want to consider getting whole life insurance. Also, if you need coverage for a much longer period, a whole life insurance plan makes more sense.