How to Decide Between Whole Life Insurance and Term Life Insurance
Shopping for life insurance policies is quite the daunting task. While most people want to get policies that can just cover the costs of their funeral arrangements and the living costs of their dependents, most experts recommend going above and beyond the bare minimum, advising people to get life insurance policies that cover 10 times their gross annual income. Besides the size of coverage, there are several other factors that can increase the price of life insurance policies, like family history, occupation, and age.
Despite all of these different price variables, the ability to afford life insurance usually boils down to one decision: whether to go with whole life insurance or term life insurance. Here’s a quick breakdown of each to help you determine which might best suit your financial situation.
Whole Life Insurance.
Whole life insurance policies are designed to last until policy holders pass away, which is why they’re sometimes called “permanent life insurance policies.” This inherently increases the risk of these policies, since the company will inevitably have to payout the policies’ beneficiaries, which makes them substantially more expensive than term life insurance policies. That being said, this type of life insurance is really an investment designed to pay off in the long run. It’s unwise to look at whole life insurance quotes unless you have substantial financial reserves, and have all revolving debts paid off.
Term Life Insurance.
As you might’ve guessed by now, term life insurance only covers policy holders for a set amount of time, like 10 or 20 years. These types of life insurance policies are inherently cheaper because the insurance company may not have to make any payout at all, since the policy holder may pass away after their insurance period has expired. Term life insurance is also cheaper because most companies offer fixed rates, which means the client will pay the same premium amount every billing period until the end of their term.
All of this being said, don’t let cost be the main deciding factor as to whether you get whole life insurance or term life insurance. While it should definitely factor in, think instead about your needs. If you need life insurance to cover your long term needs, get whole life insurance. If you need life insurance to cover short term needs, such as your child’s college education or a mortgage, then get term life insurance.
If you have any questions about the differences between these two types of life insurance, feel free to ask in the comments. Visit here for more.