{"id":302,"date":"2022-03-07T11:05:00","date_gmt":"2022-03-07T12:05:00","guid":{"rendered":"http:\/\/dishustad.com\/?p=302"},"modified":"2023-03-17T20:55:04","modified_gmt":"2023-03-17T20:55:04","slug":"term-life-insurance-vs-whole-life-insurance-whats-best-for-you","status":"publish","type":"post","link":"http:\/\/dishustad.com\/index.php\/2022\/03\/07\/term-life-insurance-vs-whole-life-insurance-whats-best-for-you\/","title":{"rendered":"Term Life Insurance VS Whole Life Insurance? What\u2019s Best for You?"},"content":{"rendered":"
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Life insurance. It’s one of those things that no one ever likes talking about, but it’s essential to ensuring any wealth you’ve built<\/a> is preserved for your future generations as an inheritance. Something that isn’t discussed enough is term vs whole life insurance pros and cons.<\/p>\n

In a study by the Life Insurance and Market Research Association (LIMRA), it was determined that over 100 million households (40%) are uninsured and underinsured.<\/a> In addition, 44% of households in the U.S. would face financial hardship<\/a> if the primary wage earner died.<\/p>\n

These stats highlight why having life insurance is essential. <\/a>No matter what type of life insurance you choose, it’s a way to shield your investments and assets to make sure they’re distributed properly to your designated beneficiaries if something happens to you.<\/p>\n

Even if you have no investments or assets at the time of your death, having life insurance can ensure that your loved ones are taken care of when you are no longer here.<\/a><\/p>\n

So, the two types of life insurance are term life insurance and whole life insurance. But which should you get? Let’s get into the difference between term life insurance vs whole life insurance, and the benefits of term insurance and whole, so you can make a financially sound decision.<\/p>\n

Term life insurance vs whole life insurance: What’s the difference?<\/h2>\n

Let’s take a look at each, along with the term vs whole life insurance pros and cons:<\/p>\n

What is term life insurance?<\/h2>\n

A term life insurance <\/a>policy is life insurance coverage that covers you for a set period of time and has no cash value account associated with it.<\/p>\n

As a result of this, the premiums are often lower than a whole life policy, which is one of the benefits of term insurance. When you choose a term life policy, you’ll choose a certain duration of years to be covered; typically a 10 or 20-year term policy. So it’s long-term but not lifetime insurance.<\/p>\n

This insurance breaks down into two different types of term life insurance:<\/p>\n

Group term life insurance<\/strong><\/h3>\n

Group term life insurance<\/a> is insurance that an employer offers to its employees as a benefit. It covers the employees of the company instead of a single individual.<\/p>\n

However, the coverage of this policy can run short of what your needs may be, so you may want to consider purchasing an individual policy. Or you could expand your existing coverage and pay the premium difference that your employer provides.<\/p>\n

Individual life insurance<\/strong><\/h3>\n

Individual life insurance<\/a> is more expensive but provides more coverage that will fully protect your loved ones when needed.<\/p>\n

You also get to customize your coverage with this type of policy rather than settling for what your employer offers with their group plan. It’s good to research and calculate how much life insurance you need for your unique situation.<\/a><\/p>\n

What is whole life insurance?<\/h2>\n

Whole life insurance, also called permanent insurance, is life insurance coverage that combines life insurance with investments and lasts the entire lifetime of the person insured.<\/p>\n

This is one of the big differences when considering term life insurance vs whole life insurance. This addition of investments<\/a> is called “cash value” and is placed in a cash-value account. It is also known as cash value life insurance.<\/a><\/p>\n

With a whole life insurance policy, you’ll pay monthly premiums for coverage, but a portion of that amount will be put into an investment account. <\/a>Your beneficiaries will receive any excess premiums at the time of your death.<\/p>\n

With a policy like this, the premiums are often higher due to the additional benefit of the cash value account.<\/p>\n

What is a cash value account and how does it work?<\/h3>\n

When you pay your insurance premium, they will use part of it to actually pay for your insurance. But the other part goes into an investment account that accumulates wealth<\/a> over the life of the policy, aka, your lifespan. This account is called a cash value account.<\/p>\n

With a cash-value account, you can withdraw money from your policy in the form of a loan plus interest. This is a great feature, but one catch is that if the loan hasn’t been paid back at the time of your death, the death benefit amount paid to your beneficiaries is decreased by the outstanding loan amount.<\/p>\n

Here are a few ways you can use a cash account:<\/p>\n