Knowing the primary differences between term and whole life insurance will help you better understand your options.
What Exactly Is Life Insurance?
Before delving into term and whole life insurance, it's best that you're aware of what life insurance is in general. You can then approach the types of life insurance available to you with a more thorough knowledge of what it entails. When you select a life insurance plan, you're purchasing a policy that will pay out a certain amount of money in the event of your death or after a lengthy period of time.
Until this money is paid, the insured person will need to make monthly premium payments. This insurance is a type of financial protection for your family when you die, providing them with the means of covering funeral costs and the salary you would have received. When it comes to life insurance, there are several different types, the main two of which are term life insurance and whole life insurance.
Differences Between Term and Whole Life Insurance
When you're trying to make a decision on which life insurance policy to choose, it's essential that you comprehend the main differences between term insurance and whole life insurance. Term life insurance provides coverage for the insured person for a set period of time, which is meant to provide protection for your family in the event that you die prematurely. The only benefits this policy offers are the monetary ones that are provided to the beneficiaries of the policy. These beneficiaries will receive the payout if you die within the set period of time. The policies tend to last anywhere from 10 to 30 years.
On the other hand, whole life insurance policies are designed to last until your death. If you purchase this policy at age 30 and die at age 90, your family will still receive the benefits. Along with the set amount of money your beneficiaries are set to receive with this policy upon your death, a separate cash value builds up as you continue to pay premiums, eventually leading to a hefty amount of extra cash. Your beneficiaries won't be required to pay taxes on this cash buildup.
Now that you know more about term vs. whole life insurance and understand what each plan provides, you can get started on the selection process with our assistance.