Term or Whole? Which Life Insurance is Better for me?

Deciding whether to purchase whole life insurance or term life insurance is a personal decision that should be based on the financial needs of your family, your beneficiaries as well as your financial goals. Life insurance is an important investment that can provide financial security for your family and, depending on the type of policy you choose, can even help you build a cash reserve.

Reasons to choose a term life insurance policy.
​When choosing between whole life or term life insurance, your circumstances play a big role in determining the best option for you. If you are the primary income earner in your household and the parent of young children, consider buying a term life policy. Essentially, with term life insurance, you are paying an insurance company to take on “a risk” that you will die during the agreed-on term of the policy. A twenty year policy mandates that your premiums will remain constant for twenty years; If you die during the twenty-year period, the insurance company pays the death benefit to the specific beneficiaries you have named in your policy. If you are past the mid-life point and your children are already grown, a term policy could cover your final expenses or provide for your spouse’s needs if he or she lives on after you die.
To assess the total value of the term policy you need for your family should you die prematurely, total your annual living expenses, your home mortgage, all current debts (with estimated date of final pay-off) and your children’s education (include private school tuition and college fees for all). Ideally, meet with a professional insurance broker who can best help you calculate a term policy that meets your family’s needs.

Reasons to choose a whole life insurance policy.
Alternatively, you might look into a whole life policy that will not only pay the face value should you die before your children are through college, but would accrue a cash value providing additional benefits or emergency funds to your family. Whole life insurance seems expensive compared to term life insurance because the money you invest in whole life policies builds cash value that you can use later in life or at the time of your death. The percentage of your costs that go into your cash accrual account increases year by year.

Switching from a term policy to a whole life policy.
Most term life insurance policies allow you to convert your term policy into a whole life insurance policy. Consider taking advantage of this flexibility if you are in your 50s or 60s and your term life policy is about to expire or you simply want to extend your life insurance coverage but the option of term insurance is prohibitive to your current age. Converting term life to whole life insurance can be an excellent way to continue your life insurance policy and also build cash value.
Life insurance is an important investment whether you choose a term policy or whole life policy. Make sure to discuss your specific needs and goals with an insurance professional who can explain the options and benefits open to you. Once you do invest in life insurance, no matter the type of policy, you can rest assured that your loved ones will have the financial security they need.