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Which Type of Coverage is Best for You?

Ask any life insurance broker about whole and term life, and you are bound to get a passionate opinion. Sometimes these passionate opinions are a result of the type of policy that they sell. Opinions also vary due to financial philosophies. Obviously both types are popular with many people. Before you sign up with an insurer, weigh the pros and cons of each type of plan and decide on which type of protection you would be the most comfortable with.

The Case for Whole Life Insurance

Whole life has many benefits. Your premiums will never go up, no matter how old you get. If you decide that you no longer need a policy when you get older, you can cash out the policy and get money back. The drawback to a permanent plan is that the premiums are more expensive. This type of plan is probably best if you intend to keep the coverage for a long period of time.

Why You Might Want Term Insurance

With term coverage, your premiums will start lower than a whole life policy, but at the end of the term, the cost of your plan is bound to go up. If you keep your policy for a long period of time, you might discover that a permanent option would have been the better way to go.

Most of us hope to live a long period of time, so that would make whole life better, right? Not exactly. Your needs will vary throughout the years. When you are younger and have a young family, there will be people that either depend on your income or your services as a stay at home parent. If you have a mortgage, you probably want to have enough money to pay off the mortgage when you die, in order to ensure that your family won't have to worry about whether they will lose the house or not after you die. When you are older and your children are grown, they hopefully will have moved out of the house and established a career. You will not need to have as much protection. This is why term coverage is so attractive to many people. At the end of the term, they probably will not need the same level of protection as they do now.

Does it make sense to get a small amount of protection to cover funeral costs, even after the kids are out of the home and the mortgage is paid for? Not necessarily. Most people have some sort of retirement savings that they put together over the course of their lifetime. As long as you do not exhaust this retirement savings over the years, there should be a little bit of money left over to pay for your funeral expenses. If you are saving money for retirement, you will probably not have any insurance needs as you near retirement age, and can cancel a term life policy, or cash out your permanent policy.

Your Best Choice

The best choice for you depends on your specific needs. Will you need to maintain this protection over a long period of time? If that is the case, whole life might be your best bet. If you are saving money away and won't need to maintain an insurance policy after your mortgage has been paid for and the kids are out of college, term will probably be your best bet. However, it is still a good idea to compare quotes from each life insurance company you are interested in.