Interested in getting a life insurance policy, but not sure if whole or term insurance is right for you? Here are some things to know about both of these types of policies so you can pick the right one for you.
How Long Does Coverage Last?
The biggest difference between these two types of life insurance policies is how long the coverage lasts. Term life insurance lasts for a very specific amount of years, which depends on the type of policy you purchase. You pay your premium as required over the years until the term of your insurance policy is finished. If you pass away during the active terms of the policy, then your beneficiaries will receive the cash benefit of the policy. If you do not pass away during that time period or do not pay your premiums, then there is no cash benefit that will be received.
Whole life works a bit differently. You will continually pay a higher premium each month for the policy, but you will receive the death benefits as long as you pay the premiums as required. There are also some other benefits of a whole life insurance policy that make it worthwhile as well.
How Big Of A Policy Should You Purchase?
A valid question that comes up when selecting a life insurance policy is what size the policy should be. It's important to think of life insurance as income replacement in case you were to pass away, not so that your family can receive a sudden cash windfall as if they hit the lottery.
You'll want to consider the ongoing costs that your family will deal with, and how they could fall behind without you being around to provide additional income. Do you have a mortgage that needs to be paid for? Are you planning to pay for your children's college education? Do you have debt that needs to be repaid? Having a policy big enough to cover these expenses and the monthly bills is what you need to have when the time comes.
What Is The Cash Value Of A Whole Life Policy?
The main difference between a term and a whole life insurance policy is that a whole life policy has a cash value aspect of it. This means that you can actually take money out of your whole life policy if you need it. The cash value builds up over time, but it allows you to gain access to the cash value of the policy later in life.
For more information, contact a life insurance provider in your area.