Life insurance provides your loved ones with a financial safety net for when you pass away. If you want to purchase this coverage, there are several different policy types. However, the two most popular choices are term and whole life. Below is more information about how they differ.

What Is Term Life?

Term life is coverage for a specific period, usually multiple years. If the insured passes away during the policy period, their beneficiaries receive a payout equivalent to the agreed-upon amount. The only value in this policy is its death benefit. Once the term expires, you no longer have coverage.

Like most policies, term coverage requires the payment of premiums, which your provider will base on age, health, and life expectancy. If you are older or have existing medical conditions, you’ll have higher premiums to compensate for the risk. If you want a higher benefit payout for your dependents, you will have increased costs, as well.

What Is Whole Life?

Whole life, on the other hand, doesn’t have an expiration period since it offers lifelong coverage to the insured. Sometimes, agencies will call it permanent life insurance. Unlike its term counterpart, this policy comes with an investment component called cash value, which builds up over time. Cash value acts like savings—it can earn interest, pay off policy loans, or purchase additional benefits.

Some policies receive annual dividends, either sent to you or added to the cash value. With whole life coverage, you can take out policy loans, but unpaid balances may impact the death benefit. Withdrawals from the cash value keep the insurance payout intact.

How to Decide Between the Two

When looking at both options, each has merits and drawbacks. It’s essential to weigh these first to know which suits your needs better. In terms of costs, term policies typically have lower premiums than their permanent counterparts, given the same payout amount. This is because the former has no investment component and only one benefit.

Features-wise, whole life insurance offers many options for investing and building wealth. While more expensive, it is ideal if you have dependents that require support after you pass away, as it provides more money.  

Find the best life insurance policy with the professionals at Toohey Insurance Services in Somerset, KY. Since 1983, this local agency has helped clients search for the right coverage for their needs. Get in touch at (606) 678-0540 to speak to a friendly representative about your options. Visit the website for more information about their services.