The decision to purchase term life insurance vs. whole life can be difficult. The decision is dependent upon your current life scenario and needs. Whole life insurance offers the value of life long coverage and cash value savings, but the monthly payments are more expensive and there may be stages of your life when term life insurance is the best fit for you and your family.
What’s the Main Difference?
The main difference between term life and whole life is that term life is has a set period, after which the policy expires. The cost of this type of policy is often lower than whole life because the odds of the insurance company having to make a payment are low. Term life offers an affordable way to keep your family protected.
Whole life insurance is there from purchase until death, as long as you pay your premiums. The policy is guaranteed to pay out when you pass away. Whole life policies have a cash value and investment component to them as well and this is another reason why it is more expensive to purchase whole life coverage.
When You Should Consider Term Life
Term life insurance serves a particular need that younger couples, individuals, and families may have for a specific amount of time. For example, you are a married individual with a spouse, three children, and a mortgage. If you were to pass away tomorrow, you’d want to make sure your family could have the same quality of life going forward. Situations you might consider include:
Once your children are grown, have finished college, and no longer live at home, these needs are met and you no longer need insurance to cover them.
Even as a single individual, you might use a term life insurance policy to ensure your mortgage is paid off so that your estate can properly handle transfer of ownership or a sale.
If you are the caregiver for an elderly parent or grandparent, you might want term life insurance to ensure it is possible to hire full-time care if something were to happen to you.
The trick is to make sure you buy a policy that covers your needs and will cover them for the proper length of time. Your insurance agent is both knowledgeable and experienced in these matters and can help you to choose the right term life policy, or direct you to the type of life insurance coverage you really need.