Term or Whole Life? How to Decide
It’s an endless question, Term Life or Whole Life? Understanding the differences between the two.
Whole Life Insurance costs more than Term Life and is more complex. This type of insurance covers more benefits. Whole life is the most well-known and simplest form of permanent life insurance, which covers you until you die. It also provides a cash-value account that you can tap for funds later in life. On the other hand, Term Life is easier to understand and costs much less but has an end date. It covers you for a fixed period of time, like 20 or 30 years.
So Which is Better?
Term life insurance is right for most people but that doesn't mean it's right for everyone, and some people may benefit from whole life insurance. It is sufficient for most families who need life insurance, but whole life and other forms of permanent coverage can be useful in certain situations.
Choose Term Life Insurance if you:
Only need life insurance to replace your income over a certain period, such as the years you’re raising children or paying off your mortgage.
Want the most affordable coverage.
Think you can invest your money better. Buying a cheaper term life policy lets you invest what you would have paid for a whole life policy.
Choose Whole Life Insurance if you:
Want to provide money for your heirs to pay inheritance or estate taxes. In 2021, estates worth more than $11.7 million per individual or $23.4 million per couple are subject to federal estate taxes. State inheritance and estate taxes vary.
Have a lifelong dependent, such as a child with disabilities. Life insurance can fund a trust to provide care for your child after you’re gone. Consult with an attorney and financial advisor if you want to set up a trust.
Want to spend your retirement savings and still leave an inheritance or money for final expenses, such as funeral costs.
Conclusion
Most people need affordable and straightforward coverage for a set period of time. which is what term life offers. If you are protecting an inheritance or special needs relative, whole life is better.
Term life is right for you if: You’re on a budget, you expect to self-insure in the future, and you just want to leave behind a death benefit to cover expenses.
Whole life is right for you if: Your estate will be subject to an estate tax, you want to build cash value, or you have long-term dependents.
Hope this was helpful!
- InsuredTY