What Is Term Life?
Term life insurance, which is also known as pure life insurance, is a type of life insurance that guarantees payment if the covered person dies during a specified term. Once the term expires, the policyholder can either renew it for another term, convert the policy to permanent coverage, or allow the policy to terminate.
Term life insurance offers level premiums for a specific period of time generally 10, 20, or 30 years. Proceeds may help your family financially if the unexpected happens when they still have major expenses.
- Term life insurance guarantees payment of a stated death benefit to the insured's beneficiaries if the insured person dies during a specified term.
- These policies have no value other than the guaranteed death benefit and feature no savings component as found in a whole life insurance product.
- Term life premiums are based on a person’s age, health, and life expectancy.
If you die during the term of the policy, the insurer will pay the face value of the policy to your beneficiaries. This cash benefit is usually not taxable and may be used by beneficiaries to settle your healthcare and funeral costs, consumer debt, or mortgage debt among other things. However, if the policy expires before your death, there is no payout. You may be able to renew a term policy at its expiration, but the premiums will be recalculated for your age at the time of renewal. Term life policies have no value other than the guaranteed death benefit. There is no savings component as found in a whole life insurance policy.
When you consider the amount of coverage you can get for your premium dollars, term life insurance tends to be the least expensive option for life insurance.
What Is Whole Life?
Whole life insurance is a type of permanent life insurance which means that the insured is covered for the duration of their life. Permanent is different from Term life insurance which covers the insured person for a set amount of time (usually between 10 and 30 years).
Certain aspects of whole life insurance can make it an appealing choice:
- Your premiums are fixed and will never go up.
- You may be able to withdraw funds or borrow against it.
- Your death benefit is guaranteed as long as you make required payments.
Because whole life insurance gives you fixed premiums and a fixed death benefit, you won't have to worry about increased premiums as you get older. And, your loved ones will also know how much to expect when your life insurance benefit is paid out after you pass away.
A whole life policy can serve as a source of emergency funds for you if something goes wrong, or you may be able to take out a loan against the policy. That's because a portion of each premium payment you make is funneled into a savings component of the policy called the "cash value"
Over time, the cash value of your policy increases, and you may have the option to withdraw funds or borrow against it. The rules on how and when you can do this vary by company and policy.
Call us at S.E. Benchmark Agency to find out which policy is the best fit for you and your family.