Term life insurance is an affordable way to make sure your family has the financial resources to cover major expenses, such as a mortgage or a child's tuition, in the event of your death. It is less expensive than whole life insurance because it only lasts for a limited period of time and your beneficiaries will not receive any money if you live beyond the end of your term. Whole life insurance, however, is more expensive because it lasts for a lifetime and has a cash value that guarantees a return of the cash value. The prequalification process for either a term or whole life insurance policy depends on several factors, such as the insurance company's underwriting process, your overall health, and the amount of coverage you want.
With a convertible term life insurance policy, you have the option to convert your term policy into a permanent life insurance policy without having to take another medical exam. If you have a fixed-term policy and die while the insurance is still active, your beneficiaries will receive the tax-free death benefit. Most lifetime insurance policies have a “level premium,” meaning that you pay the same monthly rate for the life of the policy. Term life insurance has a set time limit for coverage, while comprehensive life insurance, also known as permanent life insurance, remains in effect for life (as long as you pay the premiums).
The main disadvantage of whole life insurance is that it is significantly more expensive than a fixed-term policy. For instance, someone who recently purchased a home could take out an additional term life insurance policy to cover the cost of the house until it is paid off. Parents with disabled children may want to consider whole life insurance since it lasts for a lifetime. Term or whole life insurance can be an essential part of your financial plan.
It is important to understand the differences between these two types of policies and how they can help protect your family in case of an unexpected death. Knowing which type of policy is best for you will depend on your individual needs and financial situation.
