It's no news that life insurance can provide financial security for your loved ones when you pass on, among other benefits. But choosing the right life insurance is just as important as buying life insurance.
There are two main life insurance types; each policy is unique and tailored for different scenarios and durations. As a result, one will protect your financial future more than the other.
Although an experienced Wisconsin insurance broker will best compare term and whole life insurance to help you find the right policy, this post will give you a quick rundown of both.
What is term life insurance?
If you have more than an inkling of how life insurance policies work, you'll find "term life" insurance relatively self-explanatory.
Term life insurance works by covering you for a fixed period, which could be 2, 5, 10, 20 years, and so on, or until you reach a certain age, and pays out a death benefit if you die while the policy is active.
If you live longer than your coverage and don't renew it, your beneficiaries won't receive any benefit.
Features of term life insurance
Premiums may change - Premiums typically remain the same for a level-term policy, with the payout also fixed. For some policies, such as decreasing term life, the premium may decrease over time, as does the payout.
Conversion to whole life - There's the chance that you'll outlive term coverage. However, some insurers allow policyholders to convert term life to whole life insurance. Depending on the insurer, the conversion could be at the end of the term, at any time during the policy, or age or time specified by the insurer.
Term flexibility - You can buy term life insurance for up to 30 years. However, some insurers may impose an age limit. Also, note that buying a term policy at a younger age qualifies you for a lower premium.
Medical exam not required - Depending on the insurer, you may not be required to undergo a medical examination.
Choose term life insurance if you:
Want an affordable coverage
Want permanent life coverage but can't afford it at the moment. You can convert to whole life later.
Want coverage for only a specified period.
Do not want to use life insurance to build wealth.
What is whole life insurance?
Whole life insurance is designed to last a lifetime, unlike the fixed period of term life insurance.
There's no expiration for whole life insurance as long as you keep paying your premiums. So there's guaranteed death payment to your beneficiaries regardless of when you die.
Features of whole life insurance
Fixed premium - Premium remains unchanged throughout the life of the policyholder. However, you may pay a high premium if your death benefit is high.
Cash savings - It accumulates cash value you can borrow against for future financial needs. Although you don't have to repay your loans, the death benefit will be reduced if you don't repay your loan before you die.
Medical exam is often compulsory - It's often mandatory to undergo a medical examination for whole life insurance. You may be able to buy a whole life policy without an examination, but the coverage level will be much lower.
Choose whole life insurance if you:
Want a life-long coverage
Can afford the high premium
Want your policy to accumulate cash value
Want to leave a cash inheritance
How much will term life or whole life insurance cost?
Various factors, including age, smoking status, medical history, gender, occupation, driving records, etc., determine how much you'll pay for a life insurance policy. Some factors are out of your hands while you can control others.
By scheduling a consultation, you'll understand the right policy for your needs and the factors that'll influence your premium.