There’s a reason why the global life insurance market is expected to reach a staggering $280.4 billion by the year 2032. While no one likes to think about dying, it’s important to remember that this natural process will happen to everyone eventually.
And, if death strikes your family unexpectedly, it can leave your spouse, parents, and children in a financially precarious position. That’s why it’s vital to invest in some form of life insurance.
But which type of policy is right for your specific insurance needs: term or whole life insurance? In this guide, we’ll go over the difference between these two important life insurance options.
We’ll also cover some of the other types of insurance you should consider as you get older.
What Is Term Life Insurance?
The main difference between term and whole life insurance is their coverage periods. As the name suggests, term insurance only lasts for a specific period of time.
This is used to cover any specific financial obligations you might have during the term period. For example, maybe it’s meant to cover the time when your children are dependent on you.
The specific period varies depending on the policy, but typically it will last for between ten and thirty years. That means that there’s only a payout for your family if you pass away during that policy term. If you outlive the policy, then there’s no payout for anyone.
Term life insurance typically offers a similar payout to whole life insurance. However, because this coverage only lasts for a set period, these insurance policies tend to be a lot more affordable for the average person.
What Is Whole Life Insurance?
As long as you pay your policy premiums, whole life insurance doesn’t just last for a term, but your entire life. Whole life insurance tends to be more popular than term life insurance.
Part of this has to do with the fact that as long as your policy remains intact you’ll always have coverage for your loved one. However, there’s also a cash value component to these types of policies that makes them attractive to some people.
Whenever you pay a premium on your life insurance a portion of that costs will go to your cash value. This value will grow over time. And, eventually, you can either borrow against the cash value or sell your policy for it.
This type of life insurance can indeed be a little more complicated than term. But many people like it because their premiums remain the same and the value grows at a guaranteed fixed rate.
When Should You Choose Term vs. Whole Life Insurance?
We recommend choosing term life insurance if you only need your insurance for a specific period. For example, if you’re raising children or paying off a mortgage.
It’s also ideal for people who can’t afford whole life insurance. Maybe you’re young and healthy, but still want some coverage even though you can’t afford the more permanent option.
Whole life insurance is for people who want their coverage to last a lifetime. Ideally, your income should be enough to comfortably cover the premiums. If you’re one of the four families whose children require special healthcare needs, it also makes sense to invest in whole life insurance.
That way, their medical costs are covered if you die. It’s also good for those who want to build a cash value with their policy. Also, keep in mind that the two aren’t mutually exclusive. In some cases, it might make sense to invest in both.
What Other Types of Insurance Do You Need As You Get Older?
As you get older, your healthcare costs will increase. What’s more, as you approach retirement you’ll often lose the employee insurance coverage that you’ve enjoyed for decades.
That is why it’s vital to also get health insurance solutions, specifically in the form of Medicare plans. Once you’re over the age of 65 you’re eligible for these plans. Unfortunately, navigating these plans can be quite confusing.
There are multiple insurance plans including:
- Medicare Part A
- Medicare Part B
- Medicare Part C Advantage Plans
- Medicare Part D Prescription Drug
- Medicare Supplements
We recommend reaching out to a professional to get more information on these different types of plans. Remember that this form of health insurance is similar to life insurance in that it can protect your family.
In this case, it’s high healthcare costs that can leave some families riddled with debt if they don’t have the right plan. Investing in the right Medicare plan ensures that when you get sick and eventually pass you won’t leave your family with medical debt.
Don’t Forget About Social Security
Medicare isn’t the only form of social security that you can take advantage of as you get older. There are a variety of other benefits that can assist you throughout your life.
That starts with retirement benefits that give you a monthly income based on your salary. As you get older, the percentage of benefits you receive will increase. Like life insurance, social security can also set your family up for financial success in the event you pass.
With survivor benefits, your spouse, children, or parents can claim your benefits after you pass away. If you have a disability, you might qualify for additional social security benefits.
While not everyone will be eligible, those who are can get some additional income either for treatment or for living costs. Make sure to check out this guide if you want to learn more about the benefits of social security.
Need Help With Medicare Enrollment?
We hope this guide helps you learn more about the difference between term vs. whole life insurance. Here at Midwest Health Insurance Solutions, we know that any type of insurance policy can be a bit intimidating.
However, nowhere is this more true than with health insurance policies. That’s why we help you understand all of the different options available to you as you get older.
Do you need help comparing term vs. whole life insurance in the context of your situation? Our professional staff offers expert, bilingual guidance to help make the best choice for your needs. Let’s make sure you get the insurance coverage that you deserve!