Term Versus Whole: Which Life Insurance Is Right for You?

Life insurance is a great way to financially provide for your loved ones after your passing. However, you may wonder if you should choose term or whole life insurance. To learn more so you can decide, keep reading to review the pros and cons of each policy.

Term Life Insurance Pros

Term life insurance is the more affordable option thanks to lower premiums. The exact cost of your premium depends on many factors, including your overall health, age, and lifestyle. However, on average, you can expect to pay between $25 and $35 for a decent term life insurance policy.  

Term life insurance typically includes policies that last 10, 20, or 30 years. Therefore, another benefit is that you have more freedom to shop around when the policy ends. This may help you find a provider with better terms and lower premiums. In addition, there is little risk to canceling your policy in the middle of it if you do find a better provider.

Term Life Insurance Cons

Once you get your term life insurance policy, the premiums can't usually increase, even if you develop new conditions. However, the insurance carrier can change the premium after the policy ends or you cancel the policy. For example, if your 20-year policy ends but you choose to renew it, the insurance carrier will reevaluate you, including your age and new health conditions, to determine a new premium.

The other downside is that you may lose the money you pay each month. Term life insurance is just like most forms of insurance: use it or lose it. This isn't a problem if you are covered at the time of your death. However, once the policy ends, you don't get that money back, and you will have to buy a new policy to continue to have death benefits.

Whole Life Insurance Pro

Unlike term life insurance, whole life insurance is more of an investment because you don't lose the money. When you pay your whole life insurance premium, some of it goes into a special account. This account is what pays for death benefits. But, under some circumstances, you may be allowed to borrow from this money before your passing. Similarly, if you surrender your policy, you will get back some money you paid into it.

The other major benefit is the coverage length. Whole life insurance doesn't have policy limits because it covers you for life. As long as you pay your premium, the insurance carrier can't cancel your plan, even if your circumstances change. Therefore, once you get your whole life insurance policy, the premiums don't change.  

Whole Life Insurance Cons

The leading downside to whole life insurance is the cost. When compared to a similar term life insurance policy, you may pay anywhere between five and 15 times more for a whole life insurance policy. This makes the decision between whole life and term insurance a difficult choice for families on a budget. If you decide to change insurance carriers, however, you will have to be reevaluated, which may mean an even higher premium.

Another drawback to whole life insurance is related to one of its benefits: investing. While whole life insurance is a type of investment, you can choose better investment opportunities with higher interest rates. And if you do surrender your policy, you won't get back the entire amount you paid. Plus, as the policy ages, the surrender value changes.

If you are in the Chicago, IL, area and want to ensure your loved ones have financial stability after your passing, consider getting a life insurance policy with Illinois Insurance Center. Both term and whole life policies can provide death benefits, but only you can decide which is the right choice for you. For more information, contact us today.