Is term life insurance better than whole?
Life insurance provides critical financial protection for your loved ones. If you pass away during the coverage period, it will pay your beneficiaries a lump sum of money, which they can put toward your funeral costs, medical bills, or any outstanding debts you leave behind. They can also use it to replace any income you'd typically contribute to the household.
The two most common types of insurance are whole life insurance and term life insurance. Both have their merits, but the right one for you will depend on your goals, budget, financial needs, and other factors. For many people, the latter life insurance is the better option.
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Is term life insurance better than whole?
Here are four reasons why many people consider term life insurance to be the better choice:
Term is cheaper than whole
Because term life insurance only covers you for a set amount of time — usually 30 years or less — it tends to be much more affordable than whole life insurance, which covers you for your entire lifetime. In fact, according to various insurers, whole life premiums can actually run up to 10 times more expensive than a term life policy with the same death payout.
If you're on a tight budget, this may make term life insurance a better choice than whole life. Just keep in mind, your coverage won't last as long as it would with a whole life policy.
Term has more flexible options
Term life lets you choose the exact amount and length of coverage you need to meet your goals. If you want to ensure you have coverage until your 3-year-old daughter graduates and leaves the house, for instance, you could purchase a term life policy for 15 years (when she'll be 18).
You can also take a similar approach if you want to make sure your loved ones have the money to pay off any large debts you might have — like a mortgage loan, for example. In this case, you would buy a term life policy that lasts the length of the loan and covers you up to its current remaining balance.
Since whole life covers you for your entire lifetime, it can also help in the above cases. The difference is term life allows you to purchase only the amount of coverage you need — and nothing more (therefore minimizing your total costs).
Get a free price estimate now and start exploring your term life insurance options.
Term is simple and easy to understand
With term life, what you see is what you get. You enjoy fixed premiums, a fixed death benefit, and a preestablished coverage term. Whole life insurance, on the other hand, is a little more complicated.
Whole life insurance has a cash value attached, which is basically an investment account that grows over time. You can withdraw money from that value, borrow against it if you need to, or even use that cash value toward your premiums.
While these are certainly nice options to have, they're not for everyone, and they can also make whole life insurance policies feel somewhat confusing — particularly compared to cut-and-dry term life policies.
Term life frees up cash to invest elsewhere
One nice thing about term life is that, because it's cheaper than whole life, it can leave you with more free cash to invest — in the stock market, in real estate, in crypto or in any asset you'd like.
Rather than tying up your funds in a policy you might not utilize for many decades to come, it lets you leverage that cash now and potentially realize more growth in the long run. If you're a savvy investor, this might make term life policies more appealing than costlier whole life ones.
The right policy is personal
Both whole life and term life insurance can be smart ways to protect your loved ones, but the right choice depends on your unique goals, finances and other factors. There are also other life insurance types to consider, too, like variable life insurance and universal life insurance. If you're not sure what the best life insurance policy is for you, consider speaking to an independent insurance agent or financial advisor. You can also get a free online price quote to compare against or use the table below to review some top life insurance providers on the market.
