Life insurance can help provide the kind of peace of mind that only comes from knowing your loved ones are protected and cared for in your absence, but in general there are two distinct types of life insurance available. Buying whole life, or permanent life insurance, is a guarantee of coverage that lasts for the remainder of your life. Buying term life insurance, however, only covers you for a term that you specify, whether it is 5 or 30 years. Understanding the differences in whole vs. term life insurance is critical to making an informed decision about your insurance needs.
Goal Differences in Whole vs. Term Life Insurance
Term life policies can be a hedge against your passing away during the term of the insurance, during which your death may have a significant financial impact on your family. The general purpose of whole life insurance is to leave your beneficiaries an inheritance. Some whole life insurance policies also allow you to collect some or all of your policy’s value while you are still alive.
Cost Differences in Whole vs. Term Life Insurance
Since whole life insurance lasts for a longer term and always pays out the balance at the end of your life, the costs of whole life insurance are somewhat higher than term life insurance.
Coverage Differences in Whole vs. Term Life Insurance
Though both types of insurance primarily cover death, whole life insurance is generally more flexible and has a number of options you can choose, including terminal illness riders and disability riders that may allow you to collect all or part of the policy value early.
Choosing Between Whole vs. Term Life Insurance
It’s actually not necessary to choose between types of life insurance. Many individuals carry both types of coverage. Buying term life insurance during the early years of your life to cover the period while you are raising children, funding you and your spouse’s retirement, and are the primary breadwinner, then transitioning to a whole life policy that guarantees your family an inheritance is a popular choice. The best way to decide what option is best for your family is to compare term life insurance and whole life insurance policies yourself.