People should think twice before signing up for life insurance because it is not a way to invest money or save for college if it is bought for a child. But for people who know what insurance is for, the choice between term life insurance and whole life insurance is an important one.
A company that sells whole life insurance may give you a quote for term life insurance to help you decide which insurance to buy. Money is the main difference between the two insurance plans. For example, the first annual premium for a whole life insurance policy is usually much higher than the annual premium for a term life insurance policy.
You can buy life insurance for many reasons, such as to protect your spouse financially, pay for your children's education after you die, cover your funeral costs, give the money to charity, and so on. Most people buy life insurance so that their dependents will still have money to live on after they die.
Term life insurance is a policy that only covers your life. You get the benefits after you die. So, if you are still alive, your beneficiaries won't get any money. Whole life insurance gives you benefits if you die, but it also has a savings account called "cash value" that gives you money back if you are still alive at the end of the term you agreed to. You can also cash in the policy early or borrow money against it.
Most of the time, if you need a life insurance quote before buying a policy, the insurance company, a bank, or an online service will give it to you for free. Because of the money put into the cash value account, buying life insurance from a whole life insurance company may cost more than buying term insurance.
Also, the longer the term of your policy, from 1 to 30 years, the more cash value it has for the named beneficiaries or the surviving insured. This is because the insurance money is paid out and the cash value earns dividends, interest, or both. But any whole life insurance company or other institution can lock both whole life and term life insurance policies into the same monthly payment for the whole life of each policy.
When it comes to life insurance, many people think of whole life insurance as a type of retirement plan. However, they are more likely being forced to save with high commissions and fees, including hidden commissions up to 100% of the first year's premium. On the other hand, people in good health up to about age 50 pay less for term life insurance.
If you ask for a term life insurance quote, you will see that the premiums get more expensive after 50 years. A whole life insurance company may charge higher premiums based on the insurer's age, but most companies don't sell life insurance to people over 65.
