People are usually familiar with the basics of how life insurance works, but it’s understandable that the finer points get lost in translation. Generally, the two main types of life insurance are term life insurance and whole life insurance, both of which have pros and cons. Knowing the difference between these two types could make choosing a policy that works for you easier.
Why not contact Medical Profiles to schedule a paramedical exam for life insurance and explore your options? You can also read more about term and whole life insurance below.
What Is Term Life Insurance?
Term life insurance is the most basic life insurance policy. You pay a monthly single premium and receive coverage over a specific time period. If you pass away while the policy is active, your beneficiaries receive a fixed payout as a death benefit.
Typically, the length of a term life insurance policy is anywhere between 10 and 30 years. Also, since term life insurance policies do not have a cash investment component and serve to grant beneficiaries a death benefit payout, they are a simple option.
Pros
- Lower premiums
- Straightforward benefit-related conditions
- Easy to understand and calculate
Cons
- Policy expires
- No wealth component
What Is Whole Life Insurance?
The other main type of coverage to consider is whole life insurance, which is a permanent life insurance option. It is similar to term insurance in that you pay a monthly premium and receive a death benefit in the event that the policyholder passes away. However, the benefits of whole life insurance include the fact that they do not expire—the policy is active as long as you pay the premiums.
With level premiums, you pay the same amount each month. Plus, whole life insurance policies have an investment component that builds cash value over time. You can directly access the cash value of the policy or take a loan out against the policy value (and the cash value component grows tax-free until you access it).
Pros
- Policy never expires as long as you pay the monthly premiums
- Cash value allows for wealth-building
- Tax-free growth on cash value
Cons
- Monthly premiums are more expensive
- Outstanding loans can cut into the death benefit
Which One Is Better—Whole or Term Life Insurance?
The life insurance option you choose wholly depends on your needs. For example, term life insurance may be better if you are looking for simple coverage and have financial constraints. The regular premium payments make it easier to budget for a term life insurance policy, and once you no longer need the policy, you can cancel it without penalties.
Whole life insurance might be the superior option if you want more coverage and some wealth-building options. You can borrow against the value of the cash component. The tax advantages also make it a viable option for retirement savings, so whole life insurance is far more flexible from a financial perspective.
Asking yourself the following questions should help narrow down your ideal insurance option:
- What age are you?
- How old are your children?
- Do you have a permanent medical condition?
- Do you want tax benefits or estate-planning advantages?
- What are your monthly bills?
- Do you have a college plan for your dependents?
- Are you in good health?
If you need to plan for and protect your loved ones’ financial future, both options are suitable.
In-Person Paramedical Exams for Life Insurance
You may also find yourself in need of a paramedical exam when applying for a term or whole life insurance policy. If so, contact Medical Profiles online or call (832) 251-3926 to schedule an appointment with our testing service providers! We can even come to you!
