Whole vs. Term Life Insurance—Which One Is Right for You?
Choosing between whole life and term life insurance can be a vital part of financial planning.
These forms of insurance can help provide financial assistance to loved ones after your passing. There are numerous types of life insurance, so it’s important to understand your options.
What Are the Two Main Types of Life Insurance?
Life insurance policies can generally be categorized as either term life or permanent life. Term life insurance lasts for a specific period, such as 10, 20 or 30 years. This coverage can benefit those interested in financially protecting loved ones during critical periods, such as until children graduate college.
Term life plans offer no cash value, and their coverage ends at the end of the policy term.
Permanent life policies—whole life insurance being among the most common—offer extended protection. These policies can last your entire lifetime so long as premiums are paid. Most permanent life insurance policies provide a cash value component, allowing the policyholder to utilize these funds while they’re still living.
Should I Choose Term Life or Whole Life Insurance?
Selecting a term or whole life policy is a personal decision that must be weighed carefully. Ultimately, your decision will come down to personal circumstances and financial goals. Consider the following aspects of each type of coverage:
Term Life
Pros:
- More affordable than other types
- Offers financial coverage only when it’s needed (e.g., until a mortgage is paid off)
- Simple and straightforward
Cons:
- Coverage ends at the end of the term
- No cash value
- Extending the term is not always an option (i.e., may require a new policy at a higher cost)
Whole Life
Pros:
- Lifelong coverage
- Consistent cost (i.e., securing coverage when younger can lock in a lower price)
- Includes cash value that can grow
Cons:
- More expensive than term life
- Involves more policy complexity
- May not sufficiently cover needs as time goes on
How Do I Decide Between the Two?
Various other forms of life insurance, such as universal or indexed life insurance, may also be worth considering.
Speak with a Castillo Insurance & Income Tax Service representative to learn more about your life insurance options. We can recommend coverage that suits your circumstances. Contact us today to get started.
This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.
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