Life insurance is the sort of product that everyone needs to buy but that few people feel comfortable purchasing. When you’re doing your research—whether to buy a policy or switch carriers—you’ll likely be asked the same question by different providers: do you want to purchase a term policy or whole life insurance?
The Difference Between Term and Whole Life Insurance
The difference between term and whole life insurance is relatively simple:
- Term life insurance covers an individual for a certain length of time, called a “term.” If a person dies before their term is over, then their beneficiaries will receive a payment. Since term life insurance lasts for a pre-defined length of time, rather than the course of a person’s natural life, it can cost much less than whole life insurance.
- Whole life insurance covers an individual for their “whole” natural life. Life insurance never expires, provided that the policyholder continues paying their monthly premium. Whole life insurance also provides a “cash value,” which can be used when the insured is still alive, as well as a “death benefit,” to be paid to designated beneficiaries upon or shortly after the insured’s death. However, whole life insurance tends to be significantly more expensive than term insurance: after all, once the insured person dies and the policy ends, their beneficiaries will receive a payout.
Deciding Whether You Need Term or Whole Life Insurance
Term and whole life insurance policies each have their own advantages and disadvantages—nobody can tell you which is best is for you unless they take a holistic look at your current finances, long-term plans, and life-long goals. Ideally, your life insurance policy should complement the rest of your estate and wealth management plan: a plan that takes stock of your current assets, your retirement aspirations, and the legacy you intend to leave behind.
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Quraishi Law & Wealth offers holistic estate and asset protection planning services designed to help you make and save money at the same time. Send us a message online to schedule your initial consultation today.