While it would be great to be a kid forever, adulthood arrives for everyone. For most, that means the usual milestones: graduation, marriage and kids. Along with those joys comes being responsible for others. It’s time for life insurance. However, most first time life insurance buyers don’t know where to start. Is a term life policy right for you, or a whole life policy? What’s the difference?
Term Life Insurance
Term life insurance provides coverage for a specific period, typically 15, 20 or 30 years. It’s designed to protect your loved ones when they’re most dependent on your income. If the policyholder dies during the term, a death benefit is paid to your beneficiary.
The size of that benefit depends upon the amount of the monthly premium. Term life is a popular choice for many first time life insurance buyers because of its relative affordability.
Whole Life Insurance
Whole life insurance doesn’t have a set term. It will therefore offer death benefits throughout the life of the policyholder. Given that advantage, premiums are typically five to 15 times more expensive.
An additional benefit is that the insurer will invest a portion of your premiums. This allows the policy to accrue a cash value that you may decide to collect by surrendering the coverage.
Choosing between term and whole ultimately depends upon individual circumstances. First time life insurance buyers should consult a professional to help determine their best option.