A Simple Guide to Understanding Whole Life and Term Life Insurance

A SIMPLE GUIDE TO UNDERSTANDING WHOLE LIFE AND TERM LIFE INSURANCE ROBERT TAUROSA

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TERM LIFE INSURANCE OFTEN CALLED “PURE” LIFE INSURANCE, IT PROVIDES A SET BENEFIT TO BENEFICIARIES UPON THE INSURED’S DEATH DURING THE TIME THE POLICY IS ACTIVE — THE TERM — SUCH AS 10, 20 OR 30 YEARS. TERM INSURANCE DOES NOT ACCUMULATE ANY CASH VALUE. A TERM POLICY ENDS WHEN THE INSURED DIES OR THE TERM EXPIRES.

TERM LIFE INSURANCE The simplicity of term life makes it easy to set up. It is much cheaper than whole life. One can purchase more coverage with a term policy for less money than a whole policy.

After a term policy ends, the insured may need to renew the policy or purchase a new one with higher premiums due to age and medical issues.

Hopefully, the insured will have built wealth over the policy’s term and will not need as much coverage when the policy terminates.

Term life is suitable for those who currently have high financial responsibilities but little savings and investments.

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WHOLE LIFE INSURANCE WHOLE LIFE INSURANCE IS WHAT ITS NAME IMPLIES: COVERAGE FOR THE INSURED’S ENTIRE LIFE PROVIDED THE PREMIUMS ARE PAID. IT IS ALSO CALLED STRAIGHT OR ORDINARY LIFE INSURANCE. WHOLE LIFE IS ONE OF SEVERAL TYPES OF PERMANENT LIFE INSURANCE.

WHOLE LIFE INSURANCE Whole life insurance provides a death benefit and an opportunity for accumulating cash value. The type of policy determines how the cash value builds. While the policy is in force, the death benefit diminishes as the cash value portion increases. The cash value may be borrowed, withdrawn during retirement or used to fund the policy.

SUMMARY While term life is more feasible for most individuals, whole life is suitable in some cases. The cash value benefits people with complex financial issues. Also, some appreciate the convenience of combined insurance and investment. However, whole life usually costs up to four times as much as term.

Individuals and families should assess their financial assets, obligations and goals to discover the best life insurance option.