When it comes time to purchase life insurance, your two main choices are term and whole life. What are the advantages and disadvantages of each, and which one is right for you? Here are a few things that you should know.
How Much Can You Afford?
Term life is the less expensive option. This is because you are only paying for death benefits. On the other hand, whole life covers you for the entire span of your life. Plus, the policy accumulates a cash value over the course of however long you live.
Therefore, one of the main reasons people go for term insurance is because they can’t afford the monthly premiums associated with whole life.
Are You Looking for Temporary or Permanent Coverage?
Term life insurance is purchased for a certain number of years, generally ranging from five to 30 years per term. Since whole life insurance is permanent, this may seem to make more sense, even though it is pricier. But there are a few times when it makes more sense to go with term.
For example, at age 29, you may take a 20-year term policy to save on your monthly payment knowing that you will get to renew before you turn 50. So while your next policy will be far more expensive, it won’t be as bad as trying to get a policy after 50. The other factor is that whole life needs 12 to 15 years to reach a sizable cash value, so it doesn’t make sense to start paying for whole life if you are buying your policy as a senior.
Financial Advice from the College Planning Experts
At College Planning Source, we got our feet wet in financial planning by helping families figure out how to cover tuition costs. Now we offer financial advice on a whole range of topics, including life insurance. For more information, give us a call today at 858.676.0700, or contact us online.