TERM VS. WHOLE LIFE INSURANCE
As a new employee of Empower Brokerage, I am beginning to understand the overwhelming feeling that comes along with learning about insurance. There seems to be a million terms and concepts that accompany it. And just when you think you got those down, a million more pop up! That is why I wanted to take some of the most important insurance concepts and break them down in an easy-to-understand way, starting with term vs. whole life insurance.
Term Life Insurance
Term life insurance is just as it sounds- an insurance plan that provides coverage for a limited amount of time, usually 10-30 years. And only if you pass away during that time will your beneficiaries receive the death benefit payout. It is a great option for most because it is one of the most affordable plans in life insurance. However, since the coverage does expire, if needed, you would have to seek out a new policy which would become more expensive.
Whole Life Insurance
Whole life insurance is an insurance plan that is designed to stay in effect throughout one’s lifetime. So, you do not ever have to worry about being uninsured. Besides the length of coverage, the main difference between term and whole life insurance is that whole life has a cash value alongside the insurance policy. Every month a portion of the premium paid is put to the side, into what is like a savings, to be used as loans, retirement, or premium payments. The security of a whole life policy does come with a steep price tag. You can expect to pay six to 10 times more than a term life policy.
Pros and Cons of Each
Term Life Pros:
- Simple and straightforward
- Ability to cancel the policy before expiration
Term Life Cons:
- Expiration date requiring search for a new policy
Whole Life Pros:
- Lasts as long as you do
- Growing cash value
- Tax free loans
- Earn interest on full account *ask agent for details
Whole Life Cons:
- 6-10x more costly than term life
- Most abandon policy due to high costs
- Other investment opportunities with higher interest rates
Both types of insurance have their own benefits and downsides, so it is your job to determine what plan would best fit you and your family’s needs. I hope this helped provide you with a basic overview of what these two insurance plans have to offer!
Life Insurance Questions?
We hope this information on term vs. whole life insurance is helpful.
If you’d like to learn how we can help you plan your retirement, call Empower Brokerage to speak to one of our Life and Annuity experts (888) 539-1633
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