Whole Life Insurance vs. Term Life Insurance: Which Is Best for You?

Whole Life Insurance vs. Term Life Insurance: Which Is Best for You?

Here’s how to determine whether term life insurance or whole life insurance is the better option for you.

You insure your car and your home, but how do you insure something intangible, like your legacy? Purchasing a life insurance policy can help you prepare for the future and protect your family, but many people feel overwhelmed by the variety of life insurance options available.

When shopping for a life insurance policy, it’s important to ask yourself the right questions and have a clear understanding of your options.

Comparing Term vs. Whole Life Insurance

Depending on the premium — the amount you pay for the life insurance policy each month — and the length of time you want to be insured, you can sign up for whole life insurance, term life insurance, or both. Before making your decision, it’s important to clearly understand the difference between term life insurance and whole life insurance.

Whole life insurance

Simply put, whole life insurance is lifelong coverage. As long as the benefits are paid, whole life plans do not expire and the benefit is paid upon the death of the policyholder. While whole life insurance is more costly, there are several key benefits. The longer you have whole life insurance, the more value it accrues. Part of that cash value can be withdrawn or borrowed during the life of the policy, however, there are some implications. Also, the tax benefits of whole life insurance can make it a useful estate planning tool for some.

If you have a limited payment whole life policy, you’ll have the insurance protection for life once you’ve made the last required payment. Some whole life insurance policies may not require a health examination based on the results of your initial health questionnaire. Whole life insurance generally has a capped premium, so as you age, you’ll continue to pay the same monthly premium for the length of the policy — even if your health changes.

While the age limit to qualify for whole life insurance policies may be capped, some providers allow children as young as 15 days old to be signed up for a plan.

Term life insurance

Term life insurance is coverage for a certain period of time, such as 10, 20, or 30 years. After that time has passed, the policy can be renewed — sometimes at a new (and potentially higher) rate — or in some cases, rolled into a whole life insurance policy. Because it does not accumulate value like whole life insurance, term life insurance can be a more affordable option. Given the short-term nature of this type of life insurance, it’s often selected as a type of financial safety net by those who still have dependents.

How Much Life Insurance Coverage Do You Need?

Once you’ve finished deciding between whole life vs. term life insurance, you’ll need to determine how much life insurance coverage you’ll need. This decision will likely be based on several factors: your age, your family situation, and your goals. For example, someone with young dependents may benefit from a 30-year term life insurance policy at a higher amount to help cover college expenses and their mortgage while also serving as an income replacement. However, someone who is debt-free and has no dependents might choose a short-term plan with enough coverage for final expenses.

The following questions can help you determine how much life insurance coverage you’ll need.

Who do I want to protect?

A life insurance policy can help protect surviving family members and dependents — children, parents, and spouses — from financial burden after your death. Making a list of those you want to protect can help you determine what type of life insurance you’ll need.

How much life insurance do I need?

Determining what you want the insurance to cover can help you decide how much to purchase. You may want your coverage to match several years of your salary to support your family and cover any expenses they may be unable to afford without your support. For example, a life insurance policy can help cover your remaining mortgage or car loan, college expenses for a surviving spouse or children, or even your burial and funeral costs.

How long do I need coverage?

Some people — particularly those with dependents — choose to carry life insurance during their working years when a loss of income would threaten their family’s financial wellness. If you’re older, you may want a policy for a fewer number of years with a smaller monthly fee.

What if my life insurance needs change?

Your insurance needs may change over time depending on your family situation, income level, and the assets you accumulate over your lifetime. An annual reassessment of your plan will help ensure you are well-equipped to care for your loved ones’ current and future needs.

Finding the right insurance is a key part of planning for the future. Once you know the questions to ask, you can gain a better understanding of life insurance coverage options and make the best decision for your family. Be sure to reassess your life insurance coverage annually so you can ensure your loved ones are taken care of, no matter what happens.


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This information is general in nature and is provided for educational purposes only. Information provided and statements made by employees of Regions should not be relied on or interpreted as accounting, financial planning, investment, legal, or tax advice. Regions encourages you to consult a professional for advice applicable to your specific situation. Information provided and statements made by individuals who are not employees of Regions are the views, opinions, or positions of the individual who made the statement and do not necessarily reflect the policies, views, opinions, and positions of Regions. Regions makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented.