Basically, people get life insurance to protect against loss but the wrong kind of insurance can do more damage to your financial plan like any other financial product. It’s very important to understand the differences between the most common types of life insurance policies: term and whole.
The basic difference between the term and whole life is this – A term insurance provides the life coverage for specific period only and it is for periods of 1 to 30 years. On death of the life insured it pays sum assured to the beneficiary. On the other hand, whole life insurance is a type of permanent life insurance and specially designed to stay in effect for whole life. It combines with term and an investment component. The investment could be in bonds and money market instruments or stocks that builds a cash value.
Whole life insurance premiums are very expensive than term insurance, because you are not paying only for the insurance policy but also for the investment portion. The high cost might be worth if the policy is a good investment vehicle. The term insurance premiums rates are downright cheap for the people in good health condition up to age about 50 years. After that age, premium rates goes up. However, the premium of whole life insurance rates remains the same throughout the life of the insured. But, initial premiums are much higher for the whole life insurance policy compared to term.
After all the decision is yours, but you must go for life coverage while you are younger whether it is term or whole. If you can’t afford the whole life insurance then term insurance is the better option. Because, temporary term coverage is always better than no coverage at all. But remember, term insurance needs are only for a certain number of years, what you are insuring.
