Life insurance is the only way to provide for your loved ones in case if something happens to you. This is especially important if you’re older. When picking a life insurance policy, there are two main types that oftentimes make everything confusing. The two main types of life insurance are the term and whole life insurance.
While each one of them has its own characteristics, one of them is going to benefit you more than the other. Because both types of life insurance is completely different than one another. As for which one you should go with, it depends.
First and foremost, let’s take a look at what the term life insurance and whole life insurance really means.
Term-Life Insurance
Term-life insurance is for a set period of time, hence the name. There are 10, 20 and 30 years of coverage. Once the term is done, you lose your coverage. Although it sounds bad to lose coverage, you pay significantly less compared to whole life insurance.
The main part that determines how much you’re going to pay for your term-life insurance premiums is your age and the death benefit amount. For example, a 30-year-old can pay just under $30 for a 20-year term life policy with a $500,000 death benefit. On the other hand, a 60-year-old individual can pay upwards of $1,000 for life insurance.
So with term-life insurance, it all comes down to your age, death benefit, and pre-existing conditions if you have any. Also, tobacco usage can affect the premiums as well.
Whole Life Insurance
Whole life insurance remains with you until your last breath. While whole life insurance policies can cost way more than term-life, they have fixed premiums.
One thing that you may like about whole life insurance is that your premiums contribute to both your death benefit and a sort of savings account. Every time you pay your whole life insurance premiums, the “cash value” stacks up. You can borrow from your cash value but you’ll have to put back the amount you’ve taken. This works similarly to a loan so interests may apply.
The cash value can also be used to pay your premiums or make it contribute to your death benefit. However, if you pass away with cash value left on your whole life policy, it doesn’t go to your beneficiaries. The insurance company takes it all away for itself.
Term-Life or Whole Life | Which one you should get?
If you want to pay for your policy at the same rate and need assistance for additional savings, whole life insurance is going to be more appropriate for you.
If you only want life insurance coverage, the term-life is going to be more suited for you. Those who have major debts to pay such as mortgages or large loans, term-life insurance is going to allow you to have more cash flow.
While you cannot get a term-life policy at any moment in your life (usually term-life insurance cannot be bought after the ago 60 to 70), whole life insurance policies can be bought at any time during your life.
Overall, if you don’t have any worries about money and your age is over 70, whole life insurance is going to be the best pick. If you’re under 60 but still have major payments to make, choose term-life insurance so you can have coverage but still be able to make your payments easily.