Term Life Vs. Whole Life Insurance: How Are They Different?

Term life vs whole life insurance

Term Life Vs. Whole Life Insurance: How Are They Different?

Life insurance is designed to be paid upon the death of the insured to their beneficiaries. Term life and whole life both pay out death benefits, but they do so in different ways and are designed for two distinct purposes. Before you decide to buy a life insurance policy, you need to know why you need the money. Do you want to cover your final expenses, or are you trying to support your family who is dependent on your income? Having these answers will help you find the right policy for you and your family.

Term Life

Term life is a straightforward, very simple form of life insurance. It is much cheaper than a whole or permanent life because it is set to be in place for a specific amount of time, normally 10, 20, or more years. Premiums will be determined based on the policy amount and the number of premiums paid during the policy term. If the insured dies before the policy’s term is up, their beneficiary will receive the death benefit.

Whole or Permanent Life

Whole or permanent life is much more expensive because it pays the full death benefit no matter how long the policy has been in effect. With a whole life policy, part of your premiums is set aside and put into a cash account. The money in the cash account can be invested in a tax-deferred account that will generate interest. This allows your policy’s cash value to continue to grow for as long as your policy remains in effect. As the value increases, you can borrow against the cash portion of your policy.

Know Your Goals

When people purchase a life insurance policy, they normally have one of two goals in mind. They either want to provide for their families or make sure all their final expenses are taken care of. Term life is a great policy if you want to make sure your family doesn’t bear the cost of your funeral or other final expenses. People trying to set money aside for their families or invest in tax-deferred securities will be more likely to choose a whole or permanent life policy.

Things Change

As you get older, things begin to change. Your family may not need your financial support. Loans, like your mortgage and auto loans, will have to be paid off. When your financial priorities change, your life insurance needs will also begin to change. When you begin to experience significant life changes, it’s important to talk to an insurance agent.

When you have questions about term or whole life insurance, call Kevin or Marci at Kevin S. Dougherty Insurance. We will go over your financial situation and help you make the best possible choice when you are looking for the right type of life insurance.

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