Term vs. whole life insurance

What is term life insurance?

Term life insurance provides protection for a specific amount of time (such as 10, 15, 20 or 30 years). Once the term is over, your insurance policy ends and you are no longer covered. The main advantage of term life insurance is its affordability and the potential for a higher benefit amount.

When should I consider term life insurance?

If you’re young and have a family

In the younger stage of life, you might have significant financial obligations, such as a mortgage, car loans or dependents who rely on your income.

If you have temporary needs

You may have bigger financial responsibilities right now, but you anticipate those will decrease over time. Therefore, you wouldn’t need the life insurance coverage for those obligations later on.

What is whole life insurance?

Whole life insurance is coverage you can own for your entire lifetime. As renewal premiums are paid, your insurance policy accumulates equity (called cash value) that gives you added money you can use in an emergency. The main advantage of whole life insurance is the combination of lifelong coverage and cash value, as well as a guaranteed death benefit.

When should I consider whole life insurance?

If you want lifetime coverage

A whole life insurance policy remains in force throughout your lifetime and offers financial protection for your beneficiaries regardless of when you pass away.

If you want cash value

After several years, a whole life insurance policy accumulates cash value that can be used in an emergency.

Which life insurance option is right for me?

To decide which type of life insurance is right for you, consider your stage of life:

• Early years — If you have more financial obligations right now, term life insurance may be the right choice. It can provide a higher amount of protection at a lower cost. Remember, you can always buy an insurance policy for a shorter term (say 10 years) if you plan on having large expenses for only a few more years.
• Later years — If you’re retired or close to retirement, having a whole life insurance policy may be better. At this stage of life, you may have fewer financial obligations and, therefore, need less coverage than you did 20 years ago. Plus, with whole life insurance, you can have the security of knowing your premiums will never increase.

Seek professional advice

Talking to a licensed professional can provide valuable insights. They can help you determine the kind of coverage and the amount of protection that best meets your specific needs.

Review your coverage annually

After you choose your coverage, it’s important to review your coverage every year. You want to make sure it’s still a good fit for your stage in life.