Because life insurance may seem like a difficult topic at first, it must be broken down so that anyone can understand and take advantage of it when the time is right. Buying life insurance is an important decision in any person’s life, and comparing term life and whole life insurance will greatly affect you in the long run.
Think of term life vs whole life in the same way as leasing and buying a car. Both have their benefits, but one is more permanent than the other. Leasing a car means paying for it for a set amount of years. Once the lease is up, the contract is over and the person can walk away.
With term life insurance, the premiums are lower than permanent life insurance; however, there is no cash value. This type of insurance is designed for people who are interested in a death benefit, such as a parent who wants the insurance to pay for the child’s college bills in case the parent suffers an untimely event.
Permanent life insurance has more appeal to some people because it has a death benefit with a cash value that is tax-deferred. Some policyholders borrow from the cash value to pay for college; this cash value can also be converted into a retirement fund.
Planning ahead is the best thing anyone can do before purchasing term and permanent life insurance. Because of the savings component of permanent insurance, it may cost more at the beginning than term life; however, the premiums stay fixed for the entire life of the life insurance policy. Term insurance is cheaper at first, but the premiums increase as the person gets older.