Whole or term life insurance: Which one should you buy?

Life insurance can be a good option for those who want to leave money for heirs when they pass away. While some people prefer to focus on saving and investing on their own, others prefer to put some money into life insurance.

That way, if they pass away sooner than expected, for instance, life insurance claims can provide their beneficiaries with some inheritance. That could potentially be more money than the person could have passed on via their own savings, depending on the amount of life insurance coverage they obtain.

But there are significant differences among life insurance policies. Two main types to consider include whole life insurance, which covers you for however long you live. Term insurance, meanwhile, only covers a certain period, such as a 10- or 20-year term.

Deciding between these options depends on factors such as the risks you're looking to reduce, your age, your current finances, and more. Here, we'll take a closer look at who can benefit from these different types of life insurance.

If you're in the market for life insurance - or simply want to boost the protection you already have - then reach out to a life insurance expert now. They can answer any questions you have and help you get started with a free quote. 

Who can benefit from whole life insurance policies?

Since whole life insurance policies have fixed premiums and last a policyholder's entire life, they can be beneficial to those looking for a more conservative, stable form of life insurance. If you like the idea of being covered for life, albeit at a higher cost than term insurance, then a whole life insurance policy might be right for you.

Consider a scenario where you purchased a 30-year-term life insurance policy, and after the term ended after three decades, you decide that it's not worth it to continue with another term. However, suppose you passed away the following year, meaning 31 years after you initially bought the term life insurance policy you end up not receiving any payouts. 

For some people, this scenario might feel unpleasant; they would instead rather have purchased a whole life insurance policy so that they're covered for their whole life, instead of seeing what happens with a term policy. 

Of course, it can be impossible to predict when you'll pass, and there's a cost to the long-term security that whole life insurance provides, but you might prefer knowing that the policy will still have some value no matter how long you live.

Some people also prefer the cash value aspect of a whole life insurance policy. The cash value builds as you pay premiums over time. You can then potentially borrow against this cash value or make a withdrawal. 

A partial withdrawal would still leave the policy active but reduce the death benefit, whereas a full withdrawal would end the policy. So, you have some flexibility when choosing how to use the cash value.

If a whole life insurance policy sounds beneficial for you and your family then consider getting started today. A life insurance professional can help you now. 

Who might not benefit from whole life insurance policies?

Whole life insurance isn't the right fit for everyone. The higher costs generally associated with whole life insurance compared with term life insurance can mean that whole life premiums are out of some people's budgets.

Also: consider the risks you're trying to manage by purchasing insurance in the first place. For example, you might be trying to reduce the burden of your spouse being left as the sole-income provider while raising children in the unfortunate event that you pass away first.

In that case, you might want a term life insurance policy that covers the period of your life where your spouse might most need that support, e.g., when your children are young. 

In contrast, a whole life insurance policy might not be as worth it to you, because you might feel like if you survive that period of your life, your beneficiaries wouldn't need the money from insurance claims as much. So, you wouldn't necessarily want a whole life insurance policy that covers more than what you're looking for.

Who can benefit from term life insurance policies?

Term life insurance policies might be a better fit for those who are looking for lower-cost policies. You also might not be interested in the cash value that whole life insurance policies provide. Instead, you might put the money that would have gone there into other savings and investment vehicles.

Meanwhile, you can benefit from the peace of mind that if you pass away during the policy term, your beneficiaries will be able to receive money. Depending on the terms of your insurance policy, that could be enough to provide some financial security to your children, for example.

That can be particularly helpful if you're trying to provide financial protection during a certain stage in your life. If you're worried about your family's financial security if you die before retirement, then you might benefit from a term life insurance policy that covers this period of your life.

It's easy to determine if this is the best life insurance for your needs. Speak to a life insurance expert now who can help guide you toward the best plan.

Who might not benefit from term life insurance policies?

Some people don't benefit as much from term life insurance policies. If you're a senior with plenty of savings, for example, you might not be as financially worried about passing away before your spouse does, as they might have enough money to still live comfortably.

Or, suppose you're purchasing life insurance as a gift for your children or grandchildren. In that case, a term policy might not provide them with the financial security you're looking to provide.

For one, you would hope and perhaps assume that they far outlive the term. And by not having access to the cash value of a policy the way that a whole life insurance policy does, the child would not be able to get anything if they outlive a term life insurance policy.

Consider what type of policy works best for you

There are many different types of insurance policies that can provide financial security and reduce risk, but know that the specifics can vary greatly among insurance providers. And depending on your personal circumstances, you might find that some insurance companies' policies align more with your situation than what other providers offer. 

There are even other variations, such as universal life insurance and variable life insurance, which can provide coverage for your whole life but have more moving parts.

Ultimately, many people benefit from obtaining some form of life insurance, so consider how these different options can fit into your financial life. Shop around to compare rates, terms and policies to find the right fit for you. Use the table below to get started.