In 2020, 54% of Americans had life insurance coverage. There’s no denying that life insurance is a smart financial move for anyone with dependents.
However, not everyone is clear on how to decide between whole life insurance and term life insurance or the differences between the two options.
If you’re unsure which life insurance types you should consider, keep reading. We’ll walk you through the differences between whole vs term life insurance and help you decide which option is the right one for you.
Length of Life Insurance Coverage
Whole life insurance is a type of permanent life insurance. It means that it will cover you for your entire life as long as you continue to pay the premiums.
On the other hand, term life insurance only covers you for a specific period. The most common term life insurance policy is for ten years.
You can inquire about the different types of life insurance from certified insurance providers. Companies like Paradigm Life can help you in understanding the benefits of the different types and let you know which policy is best for your needs.
Difference in Premiums
Whole life insurance has higher premiums than term life insurance. The insurance company knows they will soon have to pay a death benefit.
With term life insurance, the insurance company is only on the hook for the death benefit if the policyholder dies within the specified term. Because of this, whole life insurance policyholders often have to pay much higher premiums.
Which Offers Cash Value
Whole life insurance offers cash value that grows over time, while term life insurance does not. You can use this cash value to pay premiums, borrow against, or withdraw for other purposes.
You can use whole life insurance as an investment tool, and it can help you save for retirement. Term life insurance is less expensive than whole life insurance but does not offer the same benefits.
Health Exam Requirements
Most life insurance policies require you to undergo a medical exam to qualify for coverage. Insurance companies use the exam to assess your health and life expectancy. Be honest when answering the questions on the exam, as this will affect the premiums you are charged and the coverage you are eligible for.
If you are healthy and have a long life expectancy, whole life insurance may be your best option. If you have concerns about the cost of premiums or have a health condition that may limit your life expectancy, term life insurance may be a better option.
Eligibility for Company Dividends
Company dividends are only available with whole life insurance. It is because whole life insurance is a type of investment, and companies typically only invest in things that have the potential to make money.
Choosing Between Whole vs Term Life Insurance to Know Which Is Best
When getting life insurance, make sure you know the difference between whole vs term life insurance. Whole life insurance offers lifelong coverage and has a cash value component that you can borrow against, while term life insurance only covers you for a set period.
Whole life insurance is right for you if you want lifelong coverage and don’t mind paying a higher premium. If you’re on a budget or only need coverage for a set period, term life insurance is a better option.
Get a life insurance quote today to see which type of policy is best for you and your family.
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