Choosing the right life insurance policy is complex. You want to know that it will take care of your family if the unthinkable happens, but the insurance premiums should also be affordable while you’re alive. Most people choose between term and whole life, each of which has a distinct set of benefits and drawbacks. The below guide explains a few of the key differences so that you can make the right choice. 

Term Life Insurance

Term life gets its name from the terms associated with these policies. These policies are simple, straightforward, and affordable, which is why many people opt for term life coverage when choosing insurance. In most cases, you’ll have coverage for 10, 15, or 30 years, depending on the term you select. If you die within this time, your family will receive a death benefit.

The major downside is that if you outlive the term, the policy is no longer active. At that point, you must select a new plan, which can be far more expensive if you’re a senior or have a medical condition. You can also convert your existing policy to whole life insurance if you’re nearing the end of the term.

Whole Life Insurance

As long as you pay the premiums, you will have whole life insurance coverage. Along with the death benefit, whole life also works as an investment vehicle. You can divert part of your premiums into savings, which accrues cash value over the life of your contract. Along with providing money to beneficiaries upon your death, you can also borrow against the policy while you’re alive. 

However, whole life is far more expensive than term life. It also typically requires a medical exam before you get approved for coverage, which can make coverage more expensive. And while the cash value component is worthwhile, it won’t earn as much money as other investment tools.