If you’ve ever been shopping for life insurance, you’ve probably heard the term “term life insurance” and “permanent life insurance”. These are two different types of life insurance that have different benefits and uses for different people. However, there is a lot of confusion surrounding the two.
The Differences Between Term And Whole Life Insurance
Term life insurance is “pure” life insurance. The policyholder pays premiums regularly, for a set period of time, usually between 10-30 years. If they die while the policy is in effect, their beneficiary (or beneficiaries) receives a death benefit payout.
It’s straightforward and affordable, which is the selling point for people who want a simple life insurance option. Setting up a term life insurance policy is ideal for people who plan to generate wealth over time and later need the peace of mind that financial protection provides. A term life insurance policy expires after a set number of years, which is ideal for wealth-building or those who won’t need the financial safety net sooner.
Term Life Insurance
Term life insurance has two types of policy types that affect the cost. The first type is the guaranteed level — these policies have a fixed premium, and they stay at a set premium level, regardless of time or market conditions. A second type is annual renewable — these policies have an annual premium. These premiums fluctuate every year, even if the market stays unchanged.
Benefits of Term Life Insurance
Simply put, term life insurance is a low-cost product. There are few bells and whistles to it and you really don’t need a lot of knowledge to get through the application process. If you think you won’t ever need the policy, walk away. Once you’ve got it, the sign up is final – if you want out of the policy, you can’t get a refund on any premiums already paid.
Benefits of Whole Life Insurance
Whole life insurance, which is a type of permanent life policy, has an important savings element called a cash value that you can take out or borrow against and can provide tax-advantaged estate planning benefits.
Are you wondering what life insurance policy is right for you? Contact us today and let us help you find the right life insurance policy for your unique needs.