Chris O'Shea
Just like any financial decision, you should be picking your life insurance policy by what fits you the best. In terms of term or permanent life insurance, the latter is the more usual route. According to one recent report, about 60 percent of all individual life insurance policies are some form of permanent insurance. And of those permanent life insurance policies, whole life insurance is the most popular. Let’s take a look at why that is.
Whole Life Insurance Basics
Whole life insurance covers you for your entire life. That’s the main difference between it and term life insurance, which only covers for you a specific amount of time. The other big difference between whole and term insurance is that the former is much more expensive than the latter. The reason whole insurance is more expensive is that it has a savings component. So when you’re paying your premium, part of it goes to the insurance aspect, the other into an interest-earning account. You can take that money out if you end up canceling your policy. You can also take out a loan against your policy’s value.
Whole Pros
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Lasting coverage. Whole life insurance lasts your entire life. It’s nice to have to not worry about getting another term policy if your term runs out. It can be hard to get a good life insurance deal when you’re older.
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Tax Breaks. The money in your whole life insurance policy grows tax deferred.
Whole Cons
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Cost. Whole life insurance can cost up to 20 times more than term life insurance.
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Lower death benefit. You’ll receive a lower death benefit with whole life insurance than if you had the same amount of money in a term policy.
Jean Chatzky
