Is Whole Life Insurance Better than Term Life Insurance?
There are different types of life insurance policies all adjusted to cover specific situations. Some people may prefer a whole life insurance policy, while a term life insurance policy may work for others. There is no deciding factor on what is better or worse.
It is important to weigh the downsides and benefits of each policy so you can pick the right plan for you and your family.
What Does a Whole Life Insurance Policy Cover?
As the name suggests, a whole life insurance policy covers the policyholder for as long as they live. You will not have to worry about the term ending before your beneficiaries are able to receive the benefits for your policy, nor do you have to worry about purchasing another policy.
This policy will pay out to your beneficiaries as long as the requirements of the policy are met.
There are certain types of whole life insurance policies that also allow you to receive cash value. These are known as universal life insurance policies and allow you to put a portion of your premiums into a cash value account. Pulling cash value from this account will not affect how much compensation your beneficiaries will receive when it comes time to file a claim.
What Does a Term Life Insurance Policy Cover?
A term life insurance policy is useful in many situations. Terms for this type of life insurance policy may be 10, 20, 30 years or somewhere in between depending on the insurer and your term policy needs. This is especially useful if you only want life insurance until you have paid off certain debts. For example, say you have expensive college tuition to pay off. You may want a life insurance policy until you have paid this amount off so that your family members are not left with the debt if you unexpectedly pass away. Once your debt is paid off, you can choose to no longer have a life insurance policy.
Can You Have More Than One Life Insurance Policy?
It is possible to have more than one life insurance policy in place at a time, although most insurance providers will not cover a single person with two whole life insurance policies. You could, however, have a whole life insurance policy and a term life insurance policy at the same time. This is useful if you want extra coverage for a certain period of time, but don’t want to give up your life insurance coverage at the end of the term.
For example, say you purchase a whole life insurance policy. You then obtain debt from your mortgage and wish to pay off your mortgage before you pass away so that your family will not have to worry about it. To ensure your family will be covered if you pass away unexpectedly, you may purchase an additional term life insurance policy to cover the amount of time you believe it will take to pay off your home’s mortgage.
In short, there is no definitive rule that states either policy is better than the other. As everyone’s lives are different, so are their life insurance policy needs. These different life insurance policies exist to cover those needs.
Is Whole Life Insurance More Expensive than Term Life Insurance?
The cost of whole life insurance and term life insurance is surprisingly similar. You may not pay a significant amount more for a whole life insurance policy as you would for a term life insurance policy. This is in part because the same compensation is expected to be paid if you pass away, whether that is within a term limit or while a whole life insurance policy is active.
When Do You Need Life Insurance?
Contrary to popular belief, you should purchase life insurance sooner rather than later. This is because young people tend to accrue a lot of debt (student loans, new house mortgages, car loans, credit card debt, etc.) that may fall to their family’s shoulders if they suddenly pass away. Life insurance also tends to be cheaper when you are younger, going up as you grow older and your health expectedly declines.
By the time you accrue debt, you should consider a life insurance policy to provide for your family in case they are unexpectedly landed with your debt. Be sure to speak with an insurance agent about your specific life insurance needs and choose the policy that is best for you.