There are many types of life insurance options but it actually comes down to two options with many variables, Term Life Insurance or Whole Life Insurance.
Term life insurance lasts for a specific amount of time (10, 20 or 30 years) and expires at the end of the term.
If you die before the term is up, a set amount of money, known as the death benefit, is paid to your designated beneficiary or beneficiaries. Term insurance is considered the simplest, most affordable life insurance policy.
Term Life Advantages
► Cheaper than Whole Life
► Coverage amounts usually start at $100,000 up to several million.
► Young Couples best and affordable option to cover mortgage (30 years) and/or children until they start College (20) years.
Term Life Disadvantages
► Coverage expires at the end of the term, and have to shop for new one at an older age if you need a new Term policy.
► Term policy premium will increase considerably if you have any medical condition that the insurance company deems risky.
Whole Life is permanent life insurance because it does not expire. It has a death benefit and a cash value. The cash value accrues interest at a predetermined fixed rate.
Each month, a certain portion of your premium will go into the cash value of the policy, which offers a guaranteed or minimum guaranteed rate of return.
The Cash Value grows over time and can be withdrawn as a loan or extra income after age 59 1/2.
Whole Life Advantages
► Doesn’t Expire (as long as you keep making payments).
► Cash Value
► Pay the same price until past age 100.
► Cash Value can grow to supplement retirement.
Whole Life Disadvantages
► Expensive – can be at least 5 times more expensive than a Term Policy.
► Other investment tools offer higher interest rate of return.
► Outstanding loans from cash value will reduce death benefit.