How To Choose Between Term and Whole Life Insurance

If you’re considering life insurance, chances are you have a few questions like:

Is it worth it? Can I afford life insurance? What type of life insurance do I need?

You know life insurance can protect you, your family, and dependents by providing financial security and peace of mind. Outside of that, life insurance can get confusing, fast.

Here is some information about life insurance to help you make a more informed decision when the time comes.

  • Term Life Insurance provides coverage for a specified “term” of years. If the insured passes away during the time period specified in the active policy, then a death benefit will be paid.
  • Whole Life Insurance provides coverage for the entire lifespan of the insured, meaning that no matter when they pass away coverage is provided. Whole life insurance is also known as permanent, or traditional, life insurance. 

Here’s a side-by-side comparison of some of the different features of term life and whole life insurance:

Whole Life Insurance vs. Term Life Insurance

Whole Life Insurance Features

  • Whole life premiums are initially more expensive than term life premiums, but whole life can potentially save you money over the life of the policy, depending on how long it is in force
  • In addition to death benefits, a cash value accumulation builds during the life of the policy
    • Takes 12 to 15 years to build up a decent cash value
    • Cash value is based on how much the return on investment is worth
    • A portion of the cash value can be withdrawn or borrowed during the life of the policy
  • Typically, you must qualify with a health exam
    • If purchased without a health exam, cost will be higher

Term Life Insurance Features

  • Term life insurance is easier and more affordable to purchase than whole life insurance
    • Term life insurance becomes more expensive as you age, especially after age 50
  • Only provides death benefits – no cash value accumulation
  • Term can be renewed to extend coverage
  • Term life insurance can be converted to life insurance
  • Some people purchase term life insurance in addition to whole life insurance for extra coverage

So which is right for you?

Here are some variables to consider when making your decision.

Whole vs. Term Life Insurance Variables

  • Age
  • Health
  • Financial needs of your family
  • Funeral plans & death expenses
  • Current age of your children
  • Long-term health expenses in the event of a serious illness
  • Mortgage & debt
  • Retirement plans
  • Estate, trust, and/or will plans

In the end, you need to do what’s best for you and your family. An experienced insurance agent can help you with an in-depth comparison of term and whole life insurance that takes into account your current and future needs, goals, and budget.

If you have questions about life insurance, contact McInturff, Milligan & Brooks via the form below or at (423) 639-5171. If you own an estate or have debts in Tennessee or Virginia, MMB can help you figure out what policies are best for you.

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