Both policies can benefit you, but overall, purchasing term life insurance is more suitable for most people.
Whichever life insurance policy you decide to purchase, it takes copious amounts of research before you can feel confident that you have the most suitable policy for you. Various insurance carriers offer different types of insurance, and it can quickly become confusing. The two main categories of life insurance are term life insurance policies and whole life insurance policies. Buying term life insurance is usually the way to go for most Americans for many reasons, but it’s not always the most suitable plan. Take a look at these four reasons why term life insurance may be the best route for you to take.
4 Reasons Why Buying A Term Life Insurance Policy is Most Suitable for You
Cost of Policy
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The cost of your life insurance premium is usually one of the most important aspects. Buying a term life insurance policy is more cost-effective because there are fewer bells and whistles than whole life insurance. In most cases, the premium on a term life insurance policy will not rise over time, and you can choose payment plans that are quarterly, monthly, or annually.
To understand why term life insurance plans are more affordable, let’s look at what a whole life insurance policy is. Once a whole life insurance policy is purchased, the policyholder has coverage for life. There is also a cash value aspect that term life insurance does not. With your whole life insurance premium, there is a cash value that you can invest or use while you are still living. Although the cash value seems very enticing, it can increase your premium immensely.
Length of Policy
One of the perks of a whole life insurance policy is that you have the coverage for the rest of your life after you purchase your plan. On the other hand, your needs will change over the years, and the coverage you bought at first may not be the amount of coverage you need right now. With a term life insurance policy, you can determine when you would like the plan to expire. Most people choose a time frame between one and 30 years. Once the policy lapses, you can decide to purchase a new plan, convert your policy into whole life insurance, or not buy any more life insurance. Take a look at a few reasons that your life insurance needs may change.
- Having a child
- Moving to a new location
- Starting a new job
- Your children are in college now
- There is a death in the family
The payout is the amount of money your beneficiaries will receive after you pass away when your policy is still in place. A payout is also known as death benefits. In both whole and term life insurance policies, the payouts are guaranteed and do not change. The main difference here is that if your term life insurance policy expires before you pass away, you will not receive any benefits. With whole life insurance, you will receive a payout as long as you are still paying the premiums. In both scenarios, you must be paying your premiums and ensuring that your policy is not expired. You never know when a tragic accident could happen, so having any type of life insurance in place is a must.
Simplicity to Understand
As we mentioned before, term life insurance is very straightforward. Buying term life insurance is much simpler than purchasing whole life insurance because it does not have the added investment piece. Although having a life insurance policy that you can turn into cash value sounds like a plus, it may be best to keep your investments and life insurance separate. If you were to save your hard-earned money into assets using your life insurance policy and you didn’t withdraw it while you were still alive, the money is the insurance company’s once you pass away. Your family will receive your payout, but any extra earned money from investments will not go to them.
Buying term life insurance, or any insurance, can be stressful. It’s important to know that you receive the right amount of coverage for the most affordable cost. Term life insurance policies are commonly the most suitable plan because it costs less and is very straightforward. To ensure that you are in the correct plan, use Fabric to quote and compare various term life insurance policies all at once. In as little as ten minutes, you can find different policies that match your needs. The Fabric app also allows you to write wills and organize your family’s finances, so you can be positive that you are taking care of your loved one in every way possible.
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