Do I Need Term or Whole Life Insurance?

By | November 11, 2021

You’ve heard the stories, seen the statistics do the research. You know that you need a life insurance policy. But which one? Whole Life Insurance is just life insurance, right? Wrong. Life insurance policies are created based on your needs and your lifestyle. It’s necessary to understand the similarities and differences as well as the pros and cons of each policy in order to know what’s right for you.

What Is Whole Life Insurance? 

If you purchase a Whole Life insurance policy, your premiums remain fixed and it remains in effect through the end of your life. Your money accumulates in a cash reserve, but you do not have control over your investments.

Do I Need Term or Whole Life Insurance?
Do I Need Term or Whole Life Insurance?

Pros:

  • You have a fixed premium through the term of your contract.
  • You build cash-value on a tax-deferred basis.
  • Has the most guarantees – fixed premium and at least minimum cash
  • values and death benefits.

Cons:

  • More expensive than Term Life.
  • You do not choose your investments.
  • Your premiums have no flexibility.

Who should purchase: If you plan on keeping your policy for more than twenty years, you should consider Whole Life Insurance. If you are a conservative investor and have trouble saving money, you need Whole Life.

What is Term Life Insurance? – Term Life insurance is purchased for a specified number of years and guarantees a pre-set, fixed payout upon your death.

Pros:

  • No matter what, if you die, you win.
  • Most term policies can be easily converted to permanent ones.
  • Inexpensive in younger years.

Cons:

  • If you outlive the term of your insurance, you do not get your money back.
  • Your premiums increase every year.
  • No cash value.

Who should purchase: If you plan on keeping your policy less than ten years, you should consider Term Life. If you have temporary needs for life insurance, e.g. you are not yet married with children but want some protection or, in the event of your death you want your 20-year mortgage to be paid off, you should consider Term Life.

Also Read: Feeling Homeowners Insurance Claim FormsHow is a Life Insurance Policy Claim Made?

What does Variable mean? – Variable Life insurance policies are dependent on the flux of the market. You choose where your investments are placed and your cash reserve is dependent on the success of those investments.

Pros:

  • You have control over your investments.
  • Can be paired with whole life insurance.
  • Stays in force until the day you die.
  • Greatest potential for cash value increase.
  • Guaranteed minimum death benefit.

Cons:

  • Minimum cash value not guaranteed.
  • Cash reserve fluxes with stock market.
  • You assume all investment risks.
  • Cannot withdraw from the cash value in your lifetime.
Do I Need Term or Whole Life Insurance?
Do I Need Term or Whole Life Insurance?

Who should purchase: If you are a savvy investor, but still want some guaranteed protection, you should consider purchasing a Variable Life insurance policy in junction with Whole Life.

Remember, before selecting a life insurance policy, you should make sure your policy reflects your needs and lifestyle, as well as your current and future financial needs and goals.

2 thoughts on “Do I Need Term or Whole Life Insurance?

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