Term vs. Whole Life Insurance - Which is Right for You?

The world of life insurance can be confusing to someone who's never had to step into it before. You hear insurance jargon being bandied about and have little idea as to its significance and how these differences will affect you. The first and biggest question that you need to answer in your search for the right life insurance policy is this: “What kind of life insurance should I get?” In the battle of term vs. whole life insurance, the winner depends on your needs and preferences. Every individual is different and some are better suited to one type of insurance than to the other.

The first contender in the battle of term vs. whole life insurance is term life insurance. Term life insurance follows a more traditional insurance model. With term life insurance, you will pay an agreed-upon premium for a specified term. If you happen to die during the term, then your beneficiaries will collect a death benefit in accordance with your policy. If nothing happens to you and you survive the length of the term, then you and your beneficiaries will receive nothing. On the whole, term life insurance is much cheaper than whole life and is a better option for those who simply want life insurance as a safety measure to guard against a worst-case scenario.

Next up in the battle of term vs. whole life insurance is whole life insurance. Whole life insurance covers a policyholder for his or her entire life. There is also an investment aspect to whole life insurance. Your premiums are invested in stocks, bonds, and other financial instruments. When you die, your beneficiaries will be paid a death benefit from the dividends of those investments. If the dividends exceed the amount of the death benefit stipulated in your policy, then they will receive a portion of that as well. A whole life policy is a good choice for those who are interested in getting a return on an investment instead of simply being protected from the worst-case scenario.

Ultimately, it's up to you which side you come down on in the battle of term vs. whole life insurance. Those who see a term policy as a waste of money should probably look into a whole life insurance. Those who don't want to spend money on an investment and simply want insurance are probably better off looking at a term policy. Either way, the choice is yours. It's nice to have options.