Life insurance is primarily intended to care for your loved ones in the event of your death. There are many types, however they can all be placed into two basic types which are Term Life and Whole Life. There is a continuing debate as to which policy offers the best coverage as well as other benefits.
Term Life Insurance Policy
A Term Life policy offers death benefits only, in other words if you die during the term of the policy, your beneficiaries will receive the face value of the policy. What is meant by “term” it is purchased for a specific number of years usually 10 to 20 years, then it expires leaving you without protection. Some term policies will allow you to renew the policy or convert it to a whole life policy. There is no accumulated cash value with a Term policy. Term life insurance is purchased for a family first starting out, or to cover a special need such as “key man insurance”, maybe to provide for inheritance that heirs will be burdened with, and many other specific needs.
Whole Life Insurance Policy
A Whole Life Insurance policy offers a death benefit and an accumulated cash value. If you should reach a point in your life when you don’t feel you need life insurance, you can redeem the cash value by cashing in your policy. Another option is to borrow against it, however depending on the policy, it could be taxable if not paid back. Because of the investment feature, this type insurance has higher premiums.
Before buying life insurance, ask yourself how long you want to keep your policy. If you want it just for ten or twenty years, term life will be your best bet. If you want life insurance until you die, then whole life policy is considered a permanent insurance and may be a better solution for you. Assess your life insurance needs to determine which coverage would work best for you whether you live or not.