Life insurance can be confusing, but itโs a must-have for all parents. If you are considering buying life insurance, you are taking a step in the right direction to protect your family. Life insurance can be a safety net for your loved ones if you unexpectedly pass away. Although itโs heartbreaking to think about, itโs incredibly beneficial to plan for whatever the future may hold. There are various insurance companies and policies to choose from, so it can become confusing very quickly.
Take a look at the two main categories of life insurance and the main differences. Understanding the differences between whole and term life insurance policies can be crucial to making the correct choice for your family.
The Main Differences Between Whole Life Insurance and Term Life Insurance Policies
Defining Term Life Insurance Policies
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Term life insurance policies are a type of life insurance that only lasts for a certain amount of time. You can purchase a plan for anywhere between 1-30 years. Once the policy expires, you no longer have coverage. This type of life insurance is the easiest to understand because it is straightforward, and there are no added benefits, unlike whole life insurance. Because there are no added benefits, term life insurance policies are much more affordable.
With term life insurance, the policy is temporary. Once the plan expires and if the policyholder is still alive, there are a few options available. The policyholder can decide to purchase another term life insurance policy, switch over to a permanent policy, or choose not to buy any more life insurance. If you happen to pass away during the time of your policy, your beneficiaries will receive the payout. As the policyholder, you can determine who you want your money to go to and how you would like it to be used.
Defining Whole Life Insurance Policies
As mentioned above, whole life insurance policies can become a little more confusing than term life insurance. This is because whole life insurance is a type of hybrid policy that adds investment to your life insurance. Whole life insurance stays in place for your entire life, meaning you never have to worry about losing your coverage.
There is also an added cash value to whole life insurance policies. This cash value can be used to invest, or the policyholder can use it while still alive. Every month, a particular portion of the premium will go into the cash value side of your premium. Over time, your cash value will grow, and you can use it for things like retirement, taking out a loan, or fund the policyโs premium. With this added cash value, whole life insurance policies are much more expensive than term life insurance policies. A whole life insurance plan can be as much as 15 times the cost of the term policies.
Understanding Which Policy is Right for You
An essential part of any life insurance policy is knowing that you are protecting your family. Take a look at the benefits of term life insurance and whole life insurance to have a side-by-side comparison.
Term life insurance benefits
- Much cheaper than whole life insurance
- Match the insurance coverage to your needs
- Convertable to a permanent policy
Whole life insurance benefits
- Lifetime coverage
- Build equity
- Estate planning for your heirs
- You may receive dividends
Speaking With a Professional
If you were to research all of the information about life insurance, you would never have enough time in the day. This is precisely why life insurance agents are here to assist you in finding the most suitable plan for your needs and your family. Because the agents do this for a living, they will be able to offer you in-depth information about carriers and their plans. An independent insurance agent is an agent that is not tied to a specific company and will give you an unbiased opinion about your coverage. They are not attached to a company, which means that they can offer you various plans from different carriers, which is completely free to you. The insurance companies pay agents, so you donโt have to pay a penny to receive their professional advice.
Searching for a whole life insurance or term life insurance policy can be a daunting and stressful task. With Fabric, you can be at ease knowing you are putting your familyโs needs first. Quote life insurance policies, write your will and organize your familyโs finances all in one place. Learn more and get started today to ensure that your family is safe from any tragic accident.
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Didnt actually realise the difference – thanks for the information
It can be very confusing, knowing which policy is best. Thank you for making it a little easier to understand x
This has been super helpful! I dont have life insurance currently, but looking to start researching more into it
Useful information thanks
I know I should have but I haven’t got any life insurance currently
Lots of great information, thanks.
This is very useful. Thanks for putting this guide together!
Insurances are SO confusing! Thanks for the explanation #KCACOLS
We do. More just for peace of mind. But the older we get, the more $$ it gets so there’s a point where I guess it’s not worth it. #KCACOLS
Insurance is so confusing and not really something people talk about. Thanks for such an informative post.
Katrina x
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Really informative post x #kcacols