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Is Term or Whole Life Insurance Right for You?

When shopping for life insurance, you need to determine whether you wish to buy term or whole life insurance. Your life circumstances, age, budget and long-term goals are some of the factors that can help you decide between whole and term insurance.

Whole life insurance covers the entire life of the insured individual as long as premiums are paid, and payout occurs at the time of death. The payout on this type of insurance is guaranteed, since every one will die at one time or another.

Term life insurance on the other hand only pays out if the insured individual dies within the term of the policy. Terms may range from one to thirty years, depending on the insurance policy.

Whole life and term life insurance policies both have advantages and disadvantages. Term life insurance tends to be much less expensive than whole life insurance, but unless you die within the term of the policy, you'll basically have paid for a product that's never used. While whole life policies cost more, there is the guarantee of an eventual payout. Whole life policies can also accumulate cash value that you could potentially borrow against if necessary.

When to Choose Term Life Insurance

In certain circumstances, it makes sense to opt for term life insurance. If you're a single person with no dependents and you'd simply like to have some insurance to cover funeral and other end of life expenses, term life insurance may be the best option. The same is true if you are working temporarily in a high-risk job you know you'll eventually be leaving.

Term life insurance is also a great choice for young parents or families that are just starting out. It may be too costly to afford whole life insurance, but term life insurance that could pay the mortgage off or put the kids through college could be very affordable.

It's also possible that maintaining whole life insurance over the course of your lifetime will prove too costly in the long run. Seniors living on fixed income may find whole life premiums hard to afford. At the same time, their adult children or retired spouse may not be dependent on them financially, so providing for them after death may no longer be an issue. It may make more sense to take advantage of term life insurance for coverage during the years of your lifetime when others are depending on you as a financial provider.

When to Choose Whole Life Insurance

Anyone who can't stand the thought of paying for life insurance that may never pay out will want to opt for whole life insurance. In a sense, it is an investment that will eventually yield financial benefits for your beneficiary. Whole life insurance can also serve as a way for wealthy individuals to enable their families to pay their estate taxes following death.

If you're caring for or financially backing any one who is going to remain a lifelong dependent, whole life insurance is probably your best option. If you're responsible for the care of someone who is disabled or even if you have a spouse or partner who has never worked, you'll probably want to provide them with as much financial support as possible after your death. When your insurance needs are long term, whole life insurance will be the best investment.

As life circumstances change, life insurance needs may change, too. An insurance agent can help you determine what type of life insurance is best for your needs today, and they can also help you plan how you'll manage insurance over your lifetime.

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