Term Life Insurance vs. Whole Life Insurance, What is Best?

One question I am often asked, is what is better to purchase when buying a life insurance policy, Whole Life or Term Life? My response is always that “it depends on what you’re looking to get out of the coverage?”

Here are the benefits of both types of policies along with the downsides of each:

Whole Life Insurance

  • Permanent Coverage for Life with a tax free death benefit for whomever you choose.
  • Tax Free Cash Build-Up with the ability to withdraw from at anytime without ever having to pay it back- it’s your money!
  • Level Premiums throughout the life of the policy- premiums never change.
  • Lowest Premium Outlay over time when compared with other life insurance products.

Term Life Insurance

  • Limited Time Period of Coverage– you choose the length of time and the amount needed for that period of time.
  • No Blood or Urine Exams needed for underwriting making the process simple and easy!
  • Renewability of Coverage without a medical examination or other evidence of insurability.
  • Convertibility of Original Policy into a permanent policy with cash build-up.

Now, some of the above bulleted items may come with conditions, for example: term life insurance does offer the ability to purchase coverage without having to take a blood or urine exam, but that is only, if you pass all of the other underwriting qualifications. Or, with a Whole Life Insurance policy, if you pull-out too much of the cash build-up in “loans” the policy may end up canceling.

There many types of policies and additional riders that can be added to each policy allowing you the ability to tailor-fit your policy to fit your exact needs. You can pick and choose, which of the above items are the pros or cons of each coverage. But, the one thing to always remember is that both policies provide proceeds that are free from income taxation. Yes, that’s 100% tax free! Offering protection for both your family and for your future retirement needs.

Thank you, for taking the time to read this. Please, comment below with any questions you may have. And keep an eye out for additional publications from our blog regarding life and disability insurance.

Published by Michael A. Luna, CIC

Asset protection specialist helping families and business owners achieve their goals.

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