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Term life Insurance vs Whole life insurance

June 25, 2019 0 insurance agent
term life insurance and whole life insurance
term life insurance and whole life insurance

Life insurance is considered as one type of long term investment would help to support your family with financial needs. Basically, among many policies you may have, it will fall into two types of life insurances: term life insurance and permanent life insurance. Both types have their pros and cons to be aware of; it depends on your current situation and needs to choose the right option. To decide which one you should go for, it’s important to understand the differences between these two.

 

Whole Life Insurance: is an insurance which will be effective until you stop paying for your premium. Overall, permanent life insurance is more complicated and more expensive than permanent life insurance. However, one good thing about whole life insurance is the cash value, which is like a long term investment. Technically, your premium is split into death benefit and cash value, it’s like a life insurance combined with financial investment. With cash value, you can do anything you want, it can be pay off a loan, use it for your retirement egg. Here are some pros and cons you can consider before buying:

 

Pros

Cons

  • It doesn’t expire
  • It works as a forced saving drive to keep yourself save a certain amount of money every month
  • You will have both life insurance and investment with cash value
  • It’s far more expensive than term life insurance (6-10 times more)
  • Comparing the interest rate, it’s likely less than other type of investments
  • The term and policy are more complicated. Review the policy carefully before you purchase

 

Term life insurance: is a very easy-understand and straightforward life insurance. The “term” means that the policy will last for a certain period of time that indicated in your policy, after which you will no longer covered by the insurance. And yes, if you wish to, you can buy new one or renew before the expired date to continue your coverage. The common terms you may see are “10, 15, 20, and 30”.  Here are some considerations you can take for term life insurance.

 

Pros

Cons

  • It’s affordable. If you start buying at your early age (20s ~ 30s), it can be around $30 to $40
  • You can cancel the policy before the expired date without compensation
  • You can reduce the cost by purchasing enough for your needs
  • Once it’s expired, it may be hard or more expensive for you to purchase another one, if you wish to continue.
  • You won’t have any money back when the policy expired or cancel the policy before the expired date

 

It really depends on your needs to decide which policy you should go for. If you don’t have much money to set aside and you have dependents or debts to take care of when you pass away, then term life insurance is solution for you. You don’t have to spend so much money every month, and you still have your family or debts covered. In the case you want to be covered for your entire life, no matter when, and you also want some money when you get older, then you can consider permanent life insurance.

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