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Life Insurance Choices: Whole or Term Life

life-1Life insurance provides financial compensation to our loved ones when we can no longer take care of them. Choosing the best life insurance policy requires looking at your specific family needs and how those needs are likely to change in the future. As far as life insurance choices available, which will fit your needs better whole or term life policies?

For some people, term policies make the best sense. For others, whole life is a better option. Let’s look at the differences between the two and discuss which one might be right for you.

Term and Whole Differences

Term life policies provide coverage for only a specific amount of time. For example, you could purchase a ten year, $250,000 policy and that means if you die within that ten year period then your beneficiaries would receive $250,000. Most of these policies are renewable after the expiration of your term but the premiums are likely to go up, particularly as you age or develop health problems. Most term policies cannot be renewed after you reach a certain age, typically 70 or 75.

In comparison, whole life policies provide coverage as long as you continue paying the policy. You also pay a set premium during that entire time; it doesn’t change as you age or if you become ill. While that may sound good, whole life policies are also extremely costly when compared to term life policies so you may not be able to afford as much coverage.

Who Benefits from Each

Term life policies work best when you need greater coverage amounts. For example, the parents of young children need to take out more coverage because they need financial protection for their kids and the surviving spouse. The family probably has lots of bills that would need to be paid, such as mortgage and car payments in addition to medical bills and funeral arrangements. Additionally, such high coverage amounts would not be needed indefinitely.

After the children become adults, they no longer need to be financially supported by their parents so mom and dad need less life insurance coverage. The flexibility and affordability of term policies works well for people whose lives and insurance needs are still changing.

On the other hand, whole life policies do provide ongoing coverage which may be a blessing in some cases. For instance, a young man who is healthy now but who is at high risk of developing serious health problems in the future may be better off choosing the whole life policy with its stable but expensive premium now.

Otherwise, he may not be eligible for any type of life insurance later or may face exorbitant premiums. Because the coverage continues regardless of changes to your health, whole life policies do offer some protection and peace of mind not found in term life policies.

The good news is you don’t always have to look that far into the future when purchasing a policy. If you are leaning towards term life coverage, for example, look for a policy that gives you the option to convert to a whole life plan. That way if your health starts to decline or are concerned your term plan won’t be renewed you have a safety net.