When shopping for life insurance, you’ll face several important decisions. One of the most basic is whether you want term life or whole life coverage. Understanding the benefits and risks of each will help you choose the best policy for your current and future financial needs.
With term life, you pay premiums for a certain period, say 20 years, and in exchange, the insurer agrees to pay your beneficiaries a stated benefit if you pass away during that time.
--You’ll receive great value.
--You can match terms to needs. Once your kids are grown, your mortgage is paid off, and your retirement is nicely funded, you may have little use for a policy.
--The policy is temporary.
--The benefit may not be paid. If you stay current with your premiums and take care of your health you’ll receive no reward for outliving your policy.
Whole life insurance provides a death benefit throughout your life. It also includes a cash value component that accrues value over time, allowing you to borrow or withdraw funds as needed.
--You’ll retain access to your money. The premiums you pay for a whole life policy become part of the policy’s cash value.
--You may receive dividends.2.
--Estate planning. If you plan to pass on sizable assets use the policy’s death benefit to remove some of the burdens of estate taxes for your heirs.
--Higher initial premiums.
Good financial decision-making is based on solid research and sound advice. If you’re in the market for life insurance, be sure to discuss your options with a qualified insurance representative. 1 Unpaid loans and withdrawals will reduce the guaranteed death benefit and policy cash value. Loans accrue interest.
2 Dividends are not guaranteed.