Dear LifeQuote Client and Policy Holder:
It is a common debate among life insurance seekers--- whether to choose term insurance or whole life? The short answer is that it depends on both your financial and personal circumstances. In order to help you decide, let's compare the differences between the two and then explain what each policy
can do for you.
Term life is the most straightforward type of insurance protection you can buy. You purchase the policy for a set period of time-from 5 to 30 years.
If you should die while that policy is in force, the policy will pay a death benefit to your beneficiary (usually a spouse or children) for the face amount of the policy. If it's a $500,000 policy, that's what your beneficiaries will receive.
If you are the family's main financial supporter, have a limited budget and your family will suffer economically if you are not around to provide for them, you will probably choose term insurance. It offers the most death benefit value for the least amount of money.
Speaking of value, when you weigh the simplicity of term insurance vs whole life insurance, it all comes down to "cash value." While whole life also provides a death benefit, its main purpose is to build up cash value.
It's often described as a savings account, but the real purpose of whole life is to build a fund to keep premiums from increasing. Some people choose to borrow money from the fund to pay for college, or other financial
needs.
The premium you pay for the whole life policy gets divided up to pay for the policy's death benefit, as well as to fund the cash value account. These policies can pay dividends or interests that contribute to the growth. The longer you hold the policy the bigger it gets. That is why overall, whole life premiums are a more expensive option at the beginning because you have to pay more in order to get the same size death benefit as you would with term life.
Another key difference between term versus whole life is this: while renewing a term insurance policy is an option up until age 75, that policy can start getting expensive because the premiums will increase as you get older. On the other hand, a whole life policy lasts the entire life of the insured-even past age 100 and the premium remains the same for the life of the policy.
Essentially, with whole life it's a matter of a bigger premium now, but a lot less later. With term insurance there are lower premiums initially but higher costs as the policy ages, along with you. Simply put, the comparison of term insurance vs whole life comes down to this: death benefit value
versus cash value.
But keep in mind that the purpose of all types of life insurance is to provide money for those who need it if you are no longer around. Choose the policy that will protect you both personally and financially and see what you can afford to buy now to outlast your family's needs.
Sincerely,
Eugene C. Gordon Founder/Chief Executive Officer, LifeQuote |
