If you are thinking of buying some life insurance, then you’ve come to the right place. There are basically two kinds of insurance, whole life, and term life. There are a few differences between these two. I’ll go over the basics of each one, so if you are thinking of buying one of these policies, you’ll have a better idea of the choices before you.
Term life is called term life because the policy is for fixed length of time. During the lifetime of the policy, if you die, then your beneficiaries receive a death benefit. It is relatively cheap, and is sometimes called “pure insurance,” because it is only for one purpose, giving those you leave behind a lump sum payments to help cover the costs of your death and any future living expenses if they are your dependents.
The main benefit of term insurance is that it is pretty cheap. You can get a death benefit of several hundred thousand dollars for less than you’d expect. This insurance, of course, is designed for your beneficiary, so anybody you leave behind that is financially dependent on you won’t have any financial difficulties.
The biggest drawback to this is that it is only designed for the beneficiary. There is no financial gain for the actual holder of the policy. While you get peace of mind knowing you won’t be leaving anybody in any financial difficulties, there is no investment or cash buildup.
The other kind of life insurance, whole life, is more involved. It pays both a death benefit, as well as build up cash value over time. The policy holder can actually take cash out later on, after it has built up some cash value. It serves as both an insurance policy and an investment vehicle.
The good point for whole life is that you get the best of both worlds. You get peace of mind knowing that you won’t be leaving anybody out in the cold, while building up cash value for yourself at the same time.
What is the biggest drawback of whole life is its price. While term life will only set you back twenty or thirty bucks a month, based on your age and health, whole life can run up to a few hundred dollars a month, or more.
In order to choose what is best for you, consider what you want out of your policy. If you are looking for a way to protect your loved ones while investing at the same time, then whole life is a good policy. However, if you have other investment options available to you, then stick with term life.