Deciding on the appropriate type of life insurance for you and your family can be difficult, but it's worth the thought you put into it. Once you decide on a plan, you can feel comfortable in knowing your loved ones will be protected in the event something unexpected happens, and you can feel confident you're making the right investment choice.
Duration of Policy
A term life insurance policy has a designated end date--that is, the policy will expire at a pre-determined time, even if you're still alive. A whole life policy's length is determined by how long you will live.
Premium Cost
Whole life insurance typically costs more than term life insurance because the former divides your premium payments between a policy payment and an investment. Term life premiums just go toward paying for the policy. There is no investment aspect to drive up the cost of the policy.
Cash Value
When you purchase whole life insurance, you are buying policy coverage and paying into an investment fund. The cash that goes into this fund is still ultimately accessible to you. This means you can take a loan out of the investment fund in case of emergencies. The amount you remove will be deducted from the final payout of your policy. Term life insurance policies do not offer this option because you are not actually paying into an investment fund.
Investment Options
The money you pay into whole life insurance will build interest over time, increasing the overall value of your policy. Essentially, your beneficiaries will get more out of the policy than you paid into it. A term life insurance plan will not accrue interest because your premium payments go solely toward paying for the policy.
Assessing Your Needs
Which life insurance policy you choose will ultimately depend on your specific needs. If you are younger and have a family, you might want to consider a term life insurance policy because this will cover your family in case something unexpected happens. But if you are looking for a long-term investment, you might want to consider whole life.
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