Life gets busy; between family, work, school, and everything else you have on your plate, there probably isn’t a lot of time (or energy) left to allocate towards planning for the future. And while protecting your loved ones is likely at the top of your to-do list, how are you putting that into practice?
Life insurance is one of the top ways you can financially protect your loved ones. But with so many options on the market, shopping for the right policy can feel overwhelming. The good news is many types of life insurance can offer you a variety of benefits beyond just a payout to provide your loved ones with additional financial security. If you’re deciding between term life insurance and whole life insurance, then you’re in the right place. We’ll demystify these two types of life insurance to help you make the right choice for yourself and those you love.
Here are the differences between whole/permanent life insurance versus term life insurance:
What is Term Life Insurance?
Term life insurance provides you with protection over the length of the policy term (typically 10, 15, 20 or 25 years). Should you pass away during the term outlined by the policy, your loved ones will receive a death benefit. When the term life insurance policy is close to expiring, you may have the opportunity to renew your policy at a higher premium or allow it to end.
Benefits of Term Life Insurance
Generally, term life insurance is less expensive than permanent and whole life insurance options. With term insurance, you’re paying for pure life insurance only, no bells and whistles. There is no cash value incorporated in this type of policy.
You may wish to secure coverage until your children have completed their post-secondary education, to ensure they have enough money to afford school should you pass away. If you have teenaged children, then you may choose a 10-year life insurance term that ends once they are in their early 20s. At this point, they will hopefully have graduated, secured their first job, and may no longer be dependent upon your income.
It is important to note that as you get older, your premiums will increase each time you choose to renew your term life insurance policy.
With some types of term life insurance, you can convert the policy to permanent life insurance. This can give you the flexibility to secure more permanent coverage if and when you need it. You may choose to start with term life insurance since it’s considered more affordable, and eventually take the leap into permanent coverage should your priorities change later in life.
What is Whole Life Insurance?
Whole life insurance is a type of permanent life insurance where your premiums are used for both protection and investments. Permanent life insurance, as the name suggests, provides you with protection throughout your lifetime, and it won’t ever expire as long you continue to pay your premiums. Your premiums are locked in at the rate you purchased your policy, which means they aren’t affected by the impacts of aging or any poor health outcomes you may experience later in your life.
Benefits of Whole Life Insurance
Wealth building strategy
A whole life insurance policy not only has coverage if you were to pass away, but it also has a cash value component you can leverage while you’re alive. This means you get the dual advantages of protection with a death benefit, as well as the opportunity to build additional wealth. While whole life insurance policies may offer a lower guaranteed rate of return on the cash value when compared to other financial products, it is considered to be low-risk, so if you have multiple existing investments, it can lower the overall volatility of your portfolio.
Borrow from the policy
Should a financial need arise in the future, the tax-free cash value of your whole life insurance policy can be borrowed against. For instance, if you need cash for your children’s tuition or renovations to your home, then you can access the amount from your policy’s cash value component.
Locked in premium
You’ll never be younger and probably never be healthier, so lock in your premium while it’s at its cheapest.
How to Purchase Life Insurance
With such an abundance of policies, plans, and providers to choose from, finding the right life insurance for you can feel overwhelming. While you can do your own research, you may not know what plan will provide you and your loved ones with the best features and coverage to match your lifestyle and future needs.
Here’s where hiring an insurance broker can be useful; they can help you navigate this process by shopping around on your behalf. They’ll present you with a variety of life insurance options to fit your budget and coverage goals, ensuring that you’re matched with a reputable provider. Reach out to the team at Keller & Associates to learn how quick and easy it is to secure the peace of mind you deserve.