Life Insurance - Term vs. Whole LifeMany individuals wonder if they should purchase term or whole li

Individuals purchase life insurance for a variety of reasons. The reasons for the policies differ so the appropriate policy and amount will also vary. All men and women should be covered if their income or support is depended on by others. Term insurance is purchased for only a specific number of years while whole life is in force throughout a person’s life unless they cancel the policy. Here are some things to think about regarding these policies:

- Term: Reasons for selecting a policy that is only in force for a specific range of years include protecting children while they’re growing up, covering the balance on a mortgage or other time sensitive loans. Parents of young kids may opt for a twenty year policy, for example. This would pay to raise their brood, should they die before their offspring reaches adulthood. Mortgage policies are typically aligned with the length of the home loans, in terms such as fifteen or thirty years. If the mortgage holder dies during that time span, the home would be paid for and left to the beneficiary, likely the spouse or children.

- Whole: Whole Life policies not only pay the beneficiary a specified amount, they also accumulate value similar to a savings account. If a person decides to cancel the coverage during their lifetime, there may be an accrued cash value to reimburse some portion of their premium costs over the year. Some parents buy this type of coverage on the lives of their children as a savings vehicle and in case one dies and needs burial expenses covered. When the child grows up, the parents may turn the policy over to their adult child and allow him or her to cash it in for college expenses.

- Costs: Because term covers less time, they have lower priced premiums. The younger a person is when he or she becomes insured, the lower the premium price tag is. This is because younger individuals typically live longer and have fewer health problems than older people. The payments are spread over longer periods of time, too, which means more money in an insurance company’s coffers before they are required to pay out. The healthier an individual is, the less costly the payments will be, as well. It’s riskier to insure a person with known health problems.

- Amount: There are different recommendations for how much coverage a person needs. Taking into consideration mortgage balance, the insured’s annual income and how much it will cost to support the surviving dependents will play a part in this. The purposes behind each person becoming insured will play a part in how much of a lump sum payout a beneficiary will need.

- Underwriters: Insurance companies have employees called underwriters. Underwriters take a look at the health history of people are applying for life insurance coverage. If a person has serious health maladies, he or she may have the application for coverage declined.

When deciding between term and whole life insurance, it’s wise to weigh the choices. Discussing this with an agent would be a smart way to gather more information.