Life insurance, while often overlooked, should form part of your overall financial plan. It can protect your family financially in the event of a tragedy and offers peace of mind. Despite this, almost half of adults in the United States still do not have life insurance.
One of the main reasons why people choose to forgo getting life insurance is because they believe that they can’t afford it. The reality is that life insurance is more affordable than people realize and there are many different options available.
In this blog post, we will look at term vs whole life insurance. We will share useful information that will help you to realize the importance of life insurance and to choose the option most suited to you.
What Is Term Life Insurance?
The easiest kind of life insurance to understand is probably term life insurance. It’s a very straightforward option and guarantees a death benefit for your beneficiary in the event that you die while the policy is in force.
This kind of life insurance has a specific duration, which can be set by the policyholder. It is common to choose between 10 and 30 years. The fact that this option is finite makes it a cheaper option than whole life insurance.
It is an excellent option, for example, if you have a young family. The policy can cover the years when your children are financially dependent on you. Once this is no longer the case, the term life insurance would expire.
What Is Whole Life Insurance?
Whole life insurance, on the other hand, is a form of permanent life insurance. As long as you continue to make payments, the policy will not expire.
The premiums you pay are typically split in two ways. One part of the payment is for the insurance component, while the other part builds a cash value that builds over time. There is usually a guaranteed interest rate of between 1% to 2% annually.
While pricier than term policies, whole life insurance offers lasting peace of mind and guaranteed payment of a death benefit to beneficiaries.
If you are interested in learning more about whole life insurance, be sure to check out this blog article.
Term vs Whole Life Insurance: The Bottom Line
The bottom line is that both term life insurance and whole life insurance are great options. The best option for you will depend on different factors. We recommend that you speak to a financial adviser to understand which option is most suitable for you.
Life insurance payouts are tax-free and can help to cover final expenses in the event of your death. You can also arrange coverage for terminal and chronic illnesses, and policies can help to supplement your retirement savings.
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