Term Life Insurance Versus Whole Life Insurance Policy
Reader’s Question:
What’s the big deal about Term life vs Whole life insurance policices? Which one is cheaper in Texas?
Karen
Houston, TX
The “big deal” is the big difference between the two. The simplest perspective I could put such difference into is this: With Texas whole life insurance, the insurance policy runs through out your life as long as you wish. During this period, you are bounded to timely payments. It is a better option if you have long financial objectives in mind. Whole life insurance policy may also provide cash money in case you have temporary needs.
On the other hand, a Texas term life insurance policy promotes a cover for a limited period of time. When you say “period”, it depends on the needs of the policy holder. Time period can be determined by the policyholder on certain clauses, such as major life stages, say from age of high school graduation to completion of college education, or say, for the whole 20 years after retirement.
As opposed to whole life insurance policies, which are often referred to as an investment, term life insurance policies are usually the cheapest life insurance available and are used to pay out benefits to family members upon your death. In a term life policy, you get to choose an amount to be paid upon your death. A whole life insurance policy makes you pay, not for the life insurance, but for a form of savings account. It is more expensive that term life since it accumulates cash value over a period of time, and such cash value can be used in the form of loans with low interest rate.
When you talk to your insurance agent, ask for a detailed explanation on the long-term costs of a term life insurance policy, while check out the possible investment options you can have with the whole life policy. This way, you will see the bigger picture and understand really the “big deal” of each type.