Life insurance doesn’t always last for your entire life:
For some individuals, it could last for a specified period of time, such as 10 or 15 years. This type of policy is referred to as “term” life insurance. So how is it different from whole life insurance?
Life insurance policies that stay in effect for your entire lifetime are called “whole” life insurance policies. As long as you continue paying premiums, you have insurance until you die.
On the other hand, there are “term” life insurance policies. These policies provide coverage for a limited period of time.
If you choose a 15-year term, for example, the insurance company will pay your beneficiary the death benefit if you pass away during the next 15 years. Which type of policy you need depends on your individual circumstances.
Whole life insurance policies are well-suited to individuals who want to provide for a beneficiary if they die, regardless of changing circumstances.
Term life insurance policies are better for individuals whose beneficiaries will not rely on them financially forever.
Let’s say you have coverage primarily for your children, and at some point, you expect your children to be grown and providing for themselves. In this case, you may not need life insurance anymore.
In this situation, a term life insurance policy may be a good choice – because term life insurance policies generally cost less than whole life insurance policies.
The conditions available with term life insurance vary, but generally, longer terms have higher premiums. But there are factors to consider other than cost when choosing between a whole and term policy.
One is reinsurability. If you acquire a terminal illness during the term of a policy, and you still need a policy when the term expires, you may not be able to get one.