The Difference between Term and Whole Life Insurance - Which One is Right for You?

Life insurance is a necessity for any adult whether they have a large family or not. In the event of your death, you want to be as certain as possible that your loved ones will be provided for and that you will not leave any debt or expenses behind that someone else will need to pay. That is where life insurance comes in. Life insurance can give you the peace of mind that comes with knowing that your family will be provided for and not saddled with any debt or other financial hardships after you die.  How do you know which life insurance option to choose, though? Many people struggle with or put off making a decision about life insurance because the choices available can be intimidating.  I, myself, put off buying a life insurance policy because I found the whole thing confusing and to be honest a bit morbid.  I have a family, however, so eventually being realistic and practical won out.  I forced myself to learn as much as I could and finally settled on a policy just recently.  Choosing between whole life and term does not have to be difficult, but it was the first major decision I had to make about life insurance.  With some careful consideration and a good understanding of the difference between term and whole life insurance, the best option for you will become apparent or obvious.

What is Whole Life Insurance?
Whole life insurance is a policy that you can purchase at one set premium and the individual who is insured has coverage until they die as long as the premiums continue to be paid. In some cases, this type of policy will also allow you to receive money when you have been diagnosed with a terminal illness, depending on the terms of your policy.  These policies tend to be more expensive, but they also build cash value that you can get back or borrow against. Since you pay in so much each month and the money collects interest, you may be able to get a hefty cash sum after many years of making payments. So as you can see, whole life has a bit of an investment element to it in addition to the insurance coverage.

What is Term Life Insurance?
Term life insurance is the easiest to understand and most commonly purchased form of life insurance, as it is purchased for a specified term. Usually these terms are from ten to thirty years, but some people arrange terms that are as short as one year or longer term policies that are in effect until they are seventy years old or older. Term life insurance is cheaper initially, but the rate can go up during each renewal term if you do not lock in a fixed rate first.
Term life does not pay you or your family anything if you die after the term has ended, and this type of policy builds no cash value. Also, you will not receive benefits if you are terminally ill, only if you pass away.

What is the Difference between Term and Whole Life Insurance?
There are a few key differences between these two different types of life insurance. The biggest differences between the two include:

• Only whole life insurance builds cash value.
• Term life insurance is cheaper initially, but the premium amounts can rise over time.
• Term life only lasts for a set term period, while whole life will last indefinitely until you die.

Knowing the difference between term and whole life insurance is the first step on the road to choosing the life insurance option that is best for you. If you are a young family and need a large amount of insurance, then you may only be able to afford term life insurance. However, if you are looking to make a conservative investment and have the money for a whole life insurance policy, it might be the best option for you. Evaluate your circumstances and your finances.  Speak with a financial planner.  Learn as much as you can about life insurance.  Just do not wait forever.