When shopping for life insurance, one of the first decisions you’ll need to make is which type of policy to purchase. The two most common types of life insurance are term life insurance and whole life insurance.
Term life insurance provides coverage for a specific period of time, typically 10-30 years. If the policyholder passes away during the term of the policy, the death benefit is paid out to their beneficiaries. If the policyholder outlives the term of the policy, the coverage ends and there is no payout. Term life insurance policies are generally more affordable than whole life policies and are a good option for those who need coverage for a specific period of time, such as to cover a mortgage or while their children are young.
Whole life insurance, on the other hand, provides coverage for the policyholder’s entire life, as long as premiums are paid. In addition to the death benefit, whole life policies also have a cash value component that grows over time. Policyholders can borrow against the cash value or even surrender the policy for its cash value if they no longer need coverage. Whole life insurance policies are generally more expensive than term life policies, but they offer more long-term benefits and can be a good option for those who want permanent coverage and a savings component.
There are also other types of life insurance policies, such as universal life insurance and variable life insurance, that combine elements of term and whole life insurance. These policies offer more flexibility and customization options but can also be more complex and expensive. When choosing a life insurance policy, it’s important to weigh the pros and cons of each type and consider your specific needs and budget.