Life insurance provides long-term financial planning options. Individuals buy life insurance to help relieve financial burdens on their family in the event of their death. It can help their family pay for funeral costs, debts the individual owed, and more. There are two main types of life insurance: term or whole life.
Term Life Insurance
Term life insurance is not permanent. Individuals purchase it for a set number of years ranging from 5 to 30. It only provides death benefits and payout only occurs if the individual dies during the term of the policy. These policies are popular because they often cost less money than whole life insurance policies. However, they become more expensive with age, especially after the individual turns 50. It is possible to convert term life insurance policies into whole life policies should the individual wish to do so.
Whole Life Insurance
Whole life insurance provides coverage for the duration of the individual’s life. It also provides a cash value payout in addition to death benefits. Individuals with whole life policies can borrow against the cash value as well. However, it can take over a decade for any meaningful cash value to accrue. While whole life policies have higher premiums initially, they can be less expensive over the individual’s lifetime. This is because the premium is fixed, whereas term life premiums increase as the individual ages and has to renew the policy.
Deciding Between Term and Whole Life
It is possible to own both types of policies. This situation often occurs when an individual already has a whole life policy but wants additional coverage for a set amount of time. Some individuals, however, may own a term policy but need a long-term solution for retirement or estate purposes. In this instance, they can convert their term policy into a whole life policy or purchase a separate whole life policy and allow their term policy to expire. To learn more about life insurance policies, contact The Reilly Company.