The Differences Between A Whole Life Insurance Policy And A Term Life Policy
While a term life insurance policy can be beneficial in the short term, a whole life insurance policy is considered more of an investment. A term life insurance policy starts when you begin paying monthly premiums, and it ends when you stop paying these premiums. A whole life insurance policy also has monthly premiums, but once the policy is mature, the policy holder no longer has to make monthly payments and the policy remains in place.
Term Life Policies Have Lower Monthly Premiums
Since term life policies never mature, there is no cash value to the policy unless the person covered under the policy dies. Many term life policies are never paid out, as a person will have coverage for a set number of years and then decide on a whole life insurance policy instead. This keeps monthly premiums down, and it is one reason people will go for a term life policy to protect their loved ones just in case something should happen to them.
Whole Life Insurance Policies Gain in Value
A whole life insurance policy increases in value over time, and it is a policy that can be borrowed against if you run into financial trouble. You will have to pay back the policy, but if your policy has cash value, this is a guaranteed loan that you can use for any of your financial needs.
Whole Life Policies Mature
Your whole life policy will require monthly premium payments until the policy matures, but then you no longer have to make payments for the policy to be in full effect. Once your policy matures, there may be significant cash value. This is a reason many people consider a whole life policy an investment, because the cash value can be used during the lifetime of the person being covered.
Whole Life Policies are More Expensive
As whole life policies have value once they mature, the monthly premium for a whole life policy vs. a term life policy is more expensive. When the cost of a whole life policy is prohibitive to getting any life insurance, people turn to the cheaper alternative of the term life policy. While both will pay benefits if you are to die suddenly, the whole life policy is a more substantial investment.
If you are considering life insurance, but you aren't sure what type of policy is best for you, it's time to sit down with an insurance agent like Matt Roenker Insurance Agency to discuss your options.