Assuming you've already determined that life insurance is a "must-have" for you and your family, you now have a few decisions to make in choosing a life insurance company as well as life insurance policy that meets the needs of your family and loved ones in the event of your premature and untimely death.
One of these decisions centers on the type of life insurance coverage you are going to use. There are more than one different types of life insurance available in order to meet the unique needs, including health situation, financial situation, lifestyle, and budget, of each individual and family.
While there are a handful of life insurance coverage options to choose from, there are two that are most common, widely recognized, and widely used - term life and whole life. You may have heard these terms used before in reference to life insurance, but are unsure about what they really mean and involve.
In order to determine whether term or life insurance is the best option for you and your family, it's essential to understand the differences between them.
Basically, term life insurance is a life insurance policy that expires after a specified time period. Term life insurance is meant to pay a "death benefit" to your selected beneficiaries - in most cases, your spouse and children - in the event of your premature death.
Term life insurance policies have lower and more affordable monthly or annual premiums, but have no cash value, and the policy only stays in effect until its expiration. As well, the policy rate may gradually increase over time as you get older.
Whole life insurance, on the other hand, provides coverage for your entire life. This type of policy is generally considerably more expensive than term life insurance because it doesn't expire, the premium doesn't increase, and it has cash value that grows over time - meaning you can "cash in" on your policy should you require emergency funds before your death, or if you want to cancel your policy.
For both term life insurance and whole life insurance, the policy will only remain in effect as long as you are paying the monthly or annual premiums regularly and on time.
Keep in mind that some term life insurance policies allow you to make a "switch" to whole life insurance down the road should you so desire. If you don't have the budget for whole life insurance now but you think it's the better option for your situation, find out if you can qualify for a term life insurance policy that has this flexible option.
Whether you choose term life insurance or whole life insurance is entirely up to you.
It's recommended to meet with a qualified life insurance agent to discuss your unique situation as well as all your options, including quotes for various life insurance policies and for which ones you qualify.