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When it comes to life insurance, there usually two options people choose from: term life insurance and whole life insurance. While making a choice between them, you should know the major differences to decide what coverage is best for you.
Term life insurance allows you to choose a term, like 5 years or 20 years, during which you will be making fixed payments monthly or annually. When the term ends, so do the insurer’s obligations, meaning the death benefit will not be paid if the insurance holder dies after the end of policy’s life.
Term life insurance is the least expensive type of life insurance and it provides a significant death benefit. Costs vary and depend on such factors as age, health and smoking habits. The older you are, the higher will be the costs for your term life insurance, and at some point the price can become too high. This type of insurance has many variable terms but it typically pays for funeral, debts, mortgage and educational costs for dependents.
Whole life insurance is a type of permanent life insurance that does not expire and pays on the death of the insurance holder. The premium does not change over time and is paid monthly or annually. After the insurance holder’s death, the value is paid as a single payment. This type of insurance is great for those who want to save a savings plan to take care of their spouse or dependents. Another advantage is that once the terms for insurance are set, the cost will not change.
Whole life insurance can be too expensive for young families and individuals who recently got married, even though the cost is consistent. For young people, term life insurance is the best option to protect the loved ones. When you choose life insurance, it is important to analyze your situation and make sure you understand all the terms of the policy you are going to get.