Term Life vs Whole Life Insurance

 


For the majority of people, financial experts we spoke to recommend term life insurance as opposed to whole, or permanent, life insurance. “Generally speaking, permanent life insurance is more complicated and far more costly than the term alternative, and for most people, they really only need life insurance for a particular period of time,” Schlesinger says. 

Pros and cons: Both types of life insurance ultimately give you peace of mind that your beneficiaries will be taken care of should you pass away. However, there are specific benefits and drawbacks to term insurance.

Cost: Term life insurance typically costs less than whole (or permanent) life insurance. That could leave additional room in your budget each month to invest more money into a brokerage account or retirement account. So long as you designate your family or whomever you’d like as a beneficiary of those accounts, they should receive any funds if you were to die unexpectedly. 

Schneider is particularly a fan of this strategy. “If you die before the term is up, you’re covered. If you don’t, your investment will have grown to much more than the whole life insurance would have provided,” he says. “Untimely death or not, you’re better off buying term and investing the rest.”

Coverage length: While term life insurance covers you for a particular period, whole life insurance lasts for your entire life and has a guaranteed death benefit. A whole life insurance policy also accumulates cash value, and some providers pay dividends to policyholders. 

Some people may need permanent life insurance to fulfill a specific need.  For example, you may require coverage for your entire life for estate purposes or you may have a special needs child or a much younger spouse. In those cases, whole life insurance might make sense, adds Schlesinger. 

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