Term Life and Whole Life Insurance:  Which option is right for you?

Read time: 4 minutes

Imagine this, you’re sitting in your living room after dinner watching your favorite show. Maybe it’s a true-crime procedural or a drama or a documentary. Regardless of what it is, inevitably the commercials will start to roll and you just might hear an ad for life insurance.

Your ears perk up; you and your spouse raise your eyebrows at each other. Maybe life insurance has been a topic of discussion in your home recently, but you’re just not sure where to start.

You’re not alone in that feeling. Life insurance can feel confusing. Here’s a quick guide to understanding the different types of life insurance and how they might best fit your needs.

What does life insurance really do?

Life insurance helps you protect what you hold most dear by providing financial payout to your beneficiaries when you pass away. While it may not help prevent illnesses or cavities, life insurance offers you the ability to plan for your and your loved ones’ futures.

Whether you’re just starting to think about retirement or a few years into your life as a retiree, life insurance can help you build a secure financial future.

Term vs. Whole: What’s the difference?

Term and whole life insurance help with different needs at different stages in life, but both can be very important based on your financial, home and work statuses. Understanding the differences between these two options is crucial to making sure that your needs, and the needs of your family, are met.

Term Life: Why do people buy it?

Term life insurance provides coverage for a specific amount of time — usually between 10 and 30 years. Here are a few reasons why people may buy term life insurance:

It’s affordable. Term policies usually come with lower premiums, which leaves more money in a given budget to invest, pay other bills or use for day-to-day necessities.
Just starting out. Term life insurance can be useful for people who are still working, paying off debts, or supporting other members of their family.
Temporary needs. Term coverage helps to cover larger financial responsibilities like student loans and mortgages. Over time, the amount owed decreases and coverage for those obligations isn’t needed.

In short, term life insurance is a great option for you if you’re hoping to gain coverage for big responsibilities without breaking your budget. And are primarily focused on covering larger, time-limited financial obligations.

Whole Life: What is
it good for?

Whole life insurance provides coverage for an entire lifetime, so long as premiums are paid on time. Here’s why someone might choose a whole life policy:

Accumulating equity. Over time, a whole life policy will gain cash value that gives added money to the policy holder. This cash value can then be used in the event of an emergency.
Lifetime coverage. Whole life insurance remains in force throughout your entire life. Regardless of when you pass away, your beneficiaries will be financially protected.
Leaving a legacy. Since whole life insurance coverage never expires, your loved ones will be able to use the benefits of the policy to pay for things like medical expenses, funeral services, outstanding debts and more.

Whole life insurance is a good option for you if you’re looking for coverage that stays with you until you pass, don’t have a lot of large financial responsibilities, and want to help ensure that your family is protected in the event of your passing.

The best of both worlds: What if you want both?

There are options for you! There are life insurance policies that provide both term and whole life in one, hybrid model. This combined coverage is great for people who are getting ready to retire, but still have a few larger financial responsibilities — mortgages, car loans, supporting children and grandchildren. But they also want to help ensure that their loved ones are taken care of after they’ve passed.

And, oftentimes, the term portion of the policy helps to make the monthly premium more affordable.

Making a decision

This doesn’t have to happen overnight. Deciding on any insurance policy is a big decision and you should feel 100% confident in the choice you make. Before deciding on anything, consider talking to a licensed professional — they can give you valuable insights and guide you through different options you may have available to you.

Life insurance is there to help protect what really matters, so you can continue to make memories and spend time with your loved ones without worrying too much about the “what ifs.”