The two major types of Life insurance are Term and Whole. Let’s find out a little more about them.
Term Life Insurance
Term life insurance is a type of life insurance policy that provides coverage for a specified period of time, or term, typically ranging from one to thirty years. It is designed to provide a death benefit to the policy’s beneficiaries if the insured person dies during the term of the policy. The death benefit is a predetermined amount of money that is paid out to the beneficiaries tax-free in a lump sum upon the insured’s death. Term life insurance policies do not typically have a cash value or investment component, and the premiums are generally lower than those of permanent life insurance policies, making it a more affordable option for many people. At the end of the term, the policy can be renewed, converted to a permanent life insurance policy, or allowed to expire.
Whole Life Insurance
Whole life insurance is a type of permanent life insurance policy that provides coverage for the entire lifetime of the insured person, as long as the premiums are paid. In addition to a death benefit, whole life insurance policies have a cash value component, which means that a portion of the premiums paid by the policyholder goes towards building cash value over time. The cash value grows tax-deferred and can be accessed by the policyholder in the form of a loan or withdrawal. The death benefit is paid out tax-free to the policy’s beneficiaries upon the insured’s death, and it typically increases over time as the cash value of the policy grows. Whole life insurance policies have fixed premiums, meaning that the policyholder pays the same amount for the life of the policy, and they may also include optional riders or benefits, such as the ability to purchase additional coverage or long-term care benefits. Whole life insurance provides lifetime coverage and a savings component that can be beneficial for those looking to build long-term financial security.
