Term Or Whole Life Insurance Is Better?

Answer for "Which is better term or whole life insurance?"

Kathryn Orr, Real Estate Agent

Real Broker Llc

First of all, you need to understand the different types of life insurance and what each type of life insurance covers. Life insurance is very important and purchasing one is in both yours and your family’s best interest. Life insurance provides a safety net for unforeseeable situations. With life insurance coverage you can go about living your best life and in case something unpredictable happens whatever expenses you might have tied yourself and your family to will not be an unbearable burden.

Life insurance helps with big expenses in case the main income provider - if that person is insured - is no longer capable to provide because of loss of income or loss of life.

Term life insurance

As the name implies, term life insurance is for a specific term or period of time. The most common term life insurances are for 5,10,20 or 30 years. They can be longer but they would be more expensive as the risk of death increases with time and age. The premium payments are fixed throughout the timeline and they are established when you purchase the insurance.

Term life insurance has the sole role of providing insurance in case of death. It can not be used as an investment as it does not have a cash value. Term life insurance is the least expensive option but it does have an end date. When that end date comes the insured, if interested, would have to make another term life insurance at the current policy calculations or change it into whole or universal life insurance if the company allows it.

Whole life insurance

The most expensive and most rigid of insurances. They are for life and besides the death benefit, they also have a cash value. This means that the insurance itself is split into two parts, one for coverage, the other for investment. During long periods of time the investment part of the insurance can increase its cash value which would make the final death benefit increase as well.

Whole life insurance is not something to be used for investment but it does have that added benefit. They offer coverage for life and from the cash value you can take money out during your life but still have the death benefit untouched. This will decrease the end benefit but it does offer the option.

Whole life insurance can be terminated and cashed out but this will add some extra payments. But in case the life insurance itself is no longer necessary, for example, you reach 70 years old and you no longer have a beneficiary, you can cash out the policy for its current value and invest the saved money in your retirement.