There are many different types of life insurance and consumers are often confused about the differences and which type of policy would be best for their family. One of the most common questions is “what is the difference between term and whole life?” We will explain each type of coverage to help you decide which policy is right for you and your family.Term life insurance is one of the most popular types of insurance. It’s called term life because the policy provides coverage for a set period of time; most policies offer 15, 20, or 30 year term life policies. If you pass away during the term of your policy, your family will receive the death benefit, or the cash value of the policy. Most people choose to get coverage for their funeral and burial expenses, outstanding bills or debt, and replace their income for a few years. Funerals can cost well over $15,000 and most people have student loans, credit card debt, mortgages, and other bills they will leave behind when they pass away. In order to cover all of those expenses and replace their income, the average person needs a policy with over $100,000 in coverage. If you outlive the term of the policy, you will most likely have options to get some or all of your premiums back. Once the term of your policy is over, you can decide whether you’d like another term policy, or if you need a whole life policy.
Whole life insurance is called that because it covers you for your whole life. Because you cannot outlive this type of policy, the death benefit is guaranteed. Death benefits for the policies are typically lower amounts than term life death benefits. There are different types of whole life insurance which include child life insurance, final expense, and single premium whole life insurance. Whole life is a great option for covering children because they are guaranteed coverage even if they procure an illness or injury that would normally disqualify them from most life insurance policies. Final expense insurance is a popular whole life product for people over the age of 50 who only need coverage for their funeral and burial expenses along with a few other outstanding bills. Single premium whole life is a unique policy that requires you to pay one lump sum premium instead of monthly or annual payments. Also, this type of coverage can almost double the death benefit; for example, if you paid $10,000 into a single premium whole life policy, your beneficiaries would receive almost $20,000 as a death benefit when you pass away.
We hope that we have helped you understand a few different types of life insurance. Because there are so many different plans that can be customized to each individual’s needs, it’s important that you talk to an insurance agent about what your family needs in order to get the most appropriate policy for you.