It is about person’s responsibility to make sure that as the life ends the family and relatives will get compensation. When providing life insurance you provide yourself with confidence that financial status of your family won’t be damaged severely.
So you have two options:
- term life insurance;
- whole life insurance.
Any of these could be a good option for you, however, there are some differences and issues for both to clarify.
What is Term Life Insurance?
You need to choose a period of time your life will be insure. It is limited by 30 years. It means that if you die within the specified period your family will get compensation and all you have to do is to sign contract and make monthly payments. The death benefit remains unchanged throughout the whole period and once it ends and insured person remains alive no one gets compensation and money paid for insurance are gone.
What is Whole Life Insurance?
Whole life insurance has no end-date – once you signed a contract it is eligible till the end of the life unless you stop making payments which is a violation of contract. It considers a bit of investment though. It is called policy’s cash value and it growing as you make payments and what is more – it cannot be taxed by government.
Apart from term life insurance your family is guaranteed to get death benefit no matter what. However, it is also more expensive and complicated.
The terms generally depend on the company you are dealing with. You can have annual dividends on your insurance and you free to use those. You can leave those dividends on your account and get income on interest or you can just take these money.
Why Whole Life Insurance Is More Expensive?
Because of the cash value it has. Whole life insurance can be treated as an investment with a zero chance to lose your money while term life insurance is just the same like any other insurance for your property – for example, home insurance.
What Type of Insurance to Choose?
You need to choose term life insurance if:
- You do not have enough money to choose whole life insurance.
- You only want to make sure your family will have an income till the certain moment (for example, till your children graduate the college).
- You are seeking or the cheapest insurance option.
- You can afford to lose money you paid as an insurance fee for the period insurance is enforced.
You need to choose whole life insurance if:
- You want to guarantee the money you pay to insurance company will return to your family.
- You want to make and can afford an investment.
- You want to have funds free from taxes.
- You want to use money you get upon retirement in the specific way knowing that in case of occasion your family will get death benefit.
- You want to go beyond the inheritance standards – you can choose as your death beneficiary any person even he is not your relative and it cannot be argued in court.
Choosing between these two options can be tough. Although term life insurance is several times cheaper, the whole life insurance gives you much more options although it is harder to serve it.