Understanding the basic kinds of insurance products available out there can reduce some of that anxiety. How can you tell whether you should go with term life insurance or whole life insurance? Term life insurance generally has the lower monthly premiums of the two. You purchase term life insurance to cover you until the kids grow up or until retirement or for another specified time range. If you don’t make any claims against the policy, you won’t receive any benefits from this type of insurance during the life of the policy. Other types of insurance are like that, examples include home insurance and auto insurance.
Whole life insurance on the other hand is viewed as a type of investment. If you were to cancel a whole life insurance policy, the insurance company would return to you the value of the investment that has accrued since you began the policy minus any fees.
How can you tell which type of life insurance is right for you? Term life insurance generally results in lower monthly premiums with higher overall coverage. With the money you save on this type of life insurance versus whole life insurance, most people can still invest in other things like mutual funds, real estate or the stock market and get as good or better rate of return than the investment in a whole life policy. Many people will buy whole life insurance for specific tax or estate planning purposes.
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Most people are familiar with “whole” life insurance. This is the kind of insurance where you will get back a certain amount of money when it “matures” at the end of the insured period.