One of the most common questions we hear from our clients is about the difference between term and whole life insurance. Understanding the differences starts with recognizing the benefits the two different options offer and how the benefits align with your overall insurance needs and financial goals.
Whole Life Insurance
Whole life insurance, as the name implies, is designed to provide permanent life insurance. In other words, it insures you throughout your entire life. With this type of life insurance, a percentage of the premium paid becomes cash value on the policy. This cash value can be withdrawn, used to take out a loan, or it can also be used to cover policy premiums.
Whole life insurance offers a guaranteed cash value. It is not designed as a primary source of income for retirement. However, it can be an option to consider as part of a safe investment strategy for retirement.
Term Life Insurance
Term life insurance is coverage for a specific period of time. As it is limited in how long it is in place, the premiums are typically lower, particularly for younger adults. Term life insurance does not build cash value over time like permanent life insurance policies can. When the term is over, the policy expires. If the insured individual passes away during coverage, the death benefit payout is provided to the beneficiary of the policy. People can also opt to end the policy at any time without penalty.
Typically, term life insurance is difficult to buy after the age of sixty. Term life policies available on the market for seniors are usually cost prohibitive for most, making them less desirable than a whole life policy.
To learn more about the differences between whole and term life, contact our advisors at 623-777-3315.