What is the Best Type of Life Insurance – Term Or Whole Life?
There are two types of life insurance: term life and whole life. Both are good choices for a variety of reasons, but the primary differences are the duration and cost. Whole life insurance provides lifetime coverage while term life policies expire after a certain number of years. Whole life policies can cost anywhere from five to fifteen times more than term policies. If you have a family, whole life insurance is a great way to protect them from the high cost of estate taxes and other costs that often accompany death.
A whole life insurance policy lasts forever, and the policyholder receives a fixed death benefit when they die. A key benefit of whole life insurance is the cash value savings mechanism that allows a part of the premium to accumulate for later use. The cash value can be withdrawn while the policyholder is still alive, although it won’t be included in the death benefit. Some people find whole life insurance to be a better option than term insurance, but it really depends on the policyholder.
While term life insurance is cheaper and easier to manage, whole life insurance is more costly and provides long-term coverage. However, if you have dependents or a high net worth, whole life insurance may be a better choice for you. Whole life insurance offers permanent coverage, but it is not cost-effective for most people. The cash value in a whole life insurance policy earns a low interest rate.