Life is all about the choices we make today. And just like any other essential lifetime decision, time and whole life insurance are two major variations in the insurance sector that normally give people a lot of frustration when it comes to choosing between the two. Well, while the idea behind the two is practically the same; providing an essential cash boost for your loved ones once you die, the costs and the benefits for the two are totally different.
So, if you’re sitting there feeling stuck as to which of the two makes the best option, today’s article gives a comprehensive coverage of the two to help you make the best choice that suits you and your family’s needs. Let’s get started!
The Lower-Cost Option; Term Life Insurance
First things first; as the name suggests, term insurance refers to a short-term insurance policy that, of course, applies to a given period of time, after which it matures. They are some of the best and simplest ways to guarantee financial protection for your loved ones in case of premature death. Since its period of protection is temporary( mainly from 10 to 30 years), you might consider having it renewed in case you’re still alive at the time of its maturity. But this is where the disadvantage sets in, as the renewal terms for these kinds of policies tend to be extremely expensive as compared to the initial terms of the agreement.
Another con of these types of policies lies in the fact that they don’t have any form of cash value attached to them. So in this case, your beneficiaries will only get the death benefit when you die. And of course, this has to be when the policy is still active. If it expires when you’re still alive, you get nothing and the policy provider ceases to have any form of obligation towards you and your family.
But then, when it comes to premium terms, you will probably love the term policy as it provides constant rates up to the end. So you won’t get any surprises on the way. there is also another option of decreasing term insurance where your contributions remain the same but the death benefits significantly reduce with time. This makes a perfect option for individuals with large amounts of credits. So in this case, you save your beneficiaries from the frustrations of settling your debts when you die.
High-Priced Long-life Protection; Whole Life Insurance
Also popularly referred to as permanent insurance, whole life insurance is basically a financial security nest that covers you for your entire life. So unlike the term insurance, this one has no designated expiry period of course until you die. And because of this, the premiums for these types of policies are usually higher than those of term insurance. But this shouldn’t discourage you as there are several benefits that come with it;
1: You and your beneficiaries get to benefit from an accumulating over time cash value, which can be used as part of retirement benefits. You can also borrow against the accumulating amount. Incredibly awesome, right?
2: They provide coverage for the higher mortality risks associated with old age, some of which term insurances cannot handle.
Did you also know that there are various forms of whole-life insurances? Well, now you know. Take for instance;
The straight life insurance: here you pay constant premiums for until when the policyholder hits 100 years when the cash value automatically equals the death benefits. And if by any chance you get to celebrate your 100th birthday, then you get to receive the accumulative amount.
The Adjustable Life Insurance: as the name suggests, this one leaves room for premium and death benefits adjustments
The Limited Pay Life Insurance; You only get to contribute your premiums for a given amount of time and age. With these options, you get to pay higher premiums.
The Graded Premium Life Insurance: this is an upgraded version of whole life insurance where the policy contributor gets to pay higher premiums as time goes by. So basically the premiums significantly increase with time.
Term vs Whole Life Insurance: Which is Better For You?
From the above-detailed coverage, it’s clear that there is no absolute wrong or right insurance choice among the two. If anything, what you choose should entirely depend on your personal needs and situation. For instance, if you prefer working with low premiums so that you can invest the rest of your money in other money generation projects to benefit your loved ones, then you might want to consider taking up term insurance. You, however, should be smart about this and ensure you have a clear set retirement and investment plan by the time the policy expires.
But if you aren’t sure of any favorable investment plan and would like a permanent policy with an accumulating cash value for your loved ones, then a whole life insurance makes the perfect pick. This option also works perfectly fine for individuals lagging behind on retirement savings as this is one way of boosting them.
Remember, no matter your choice, you should primarily focus on your peace of mind. So be ready to truly embrace it, be it in term or whole life insurance. As Ty Stewart from SimpleLifeInsure.com explains, whole life insurance policies are a great investment option but the guaranteed universal policy is a much more cost-effective life insurance option on a month to month basis. As you can see, they both have their own set of pros and cons.
Having a life insurance is one of the best financial decisions you could ever make in your life. But with the presence of both term and whole life insurance policies, you have the task to choose what fits your needs. If for example, you are working on a tight budget with other beneficial investment options in mind, then term insurance would work just fine. But if all you want is a permanent life coverage with cash value benefits, then go for the whole life insurance. All in all, they are both great options, given that they serve your needs.