Life insurance is something many people don't like to think about. Still, if you have a family to protect, life insurance is an unfortunate necessity. The two most common types of life insurance policies are term and whole. Term is meant to be a short-term solution, such as from the time your children are born until they're 18. Whole life insurance is a set premium amount that you pay annually, which covers you for the entire life span. Each type of plan has its advantages and disadvantages and the type you take out will depend on your budget and your family's needs.
Pros: Whole Life Insurance
The major benefit of whole or permanent life insurance policies is they they have a fixed premium that never changes over the course of your entire life. This is possible because a portion of your premium is invested by the company and earns interest over time. The rate you pay when you are 30 will be the same rate you pay when you are 90. The second benefit of whole life insurance is that it has cash value. Unlike term life insurance, you are entitled to some of the money you pay in. This means that if you've paid a substantial amount of money into your policy and encounter rough financial times, you can cash out your policy or take out a loan from your policy with low payments.
Pros: Term Life Insurance
Term life insurance has low rates. Because you're only taking out the policy for a set amount of time, you can shop around for the lowest premiums possible. These kinds of policies are the most flexible. You can take on out with the birth of a new child, then cancel the policy when your child is no longer a dependent. These policies are easy to get and easier to tailor to your family's specific needs. Many employers take these types of policies out on their employees. It's a good option for younger people who plan on using retirement accounts to fund burial expenses but would like to provide for their families should an accident occur earlier in life.
Cons: Whole Life Insurance
One of the major cons of whole life insurance is that it locks you into a program for decades. Your terms never change and your accounts aren't easily adaptable to new market conditions or rolled into current retirement packages. What this means is that if your financial situation dramatically changes, you will not be able to increase or decrease your coverage without cashing out your plan and purchasing a new one. These plants typically have much higher premiums than term life insurance policies as well.
Cons: Term Life Insurance
Term life insurance policies are easy to out live. Because they're temporary solutions, once your term limit has been reached, you'll have to purchase another plan, likely at a higher rate. Term life insurance plans also have no cash value, so the money you pay in is gone to you. This is unattractive to some as the average consumer will outlive their policy and never need to use it. It can be more difficult to get a new policy if your health has declined or you've been diagnosed with certain conditions.
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