Understanding The Difference Between Term And Whole Life Insurance

Understanding The Difference Between Term And Whole Life Insurance

Obtaining a suitable policy can help protect you and your loved ones financial hardship if something unfortunate occurs and you pass away. When a policyholder dies, any family member named as a beneficiary on a policy will receive a payout that is not typically subject to income tax. There are numerous types of life insurance policies available, so sometimes it can be challenging to understand the type that will benefit you the most. If you are located in San Diego, California, and want to determine the best type of life insurance for your situation, Windfall Insurance Services Inc. can help. Read on to learn more about the difference between term and whole life insurance.

Overview: Term And Whole Life Insurance Policies

The two most common types of life insurance are term and whole life insurance, and the main differences between them are the cost and time duration of the policy. Term life insurance tends to be cheaper than whole life insurance, covering a policyholder for only a specified amount of time and paying out if the policyholder passes away during the term. Whole life insurance lasts a lifetime, and has a cash value amount; therefore it is more expensive. Beneficiaries of a whole life insurance policy can spend the death benefit on costs including funeral expenses of their loved one, paying off debt, educational expenses, etc.

Term Life Insurance: Essential Information

Term life insurance is intended to last for a specific period of time, with an average policy lasting between ten and thirty years. There is a payout to beneficiaries if the policyholder passes away during the term, however, if the policyholder outlives the term, the policy becomes expired and beneficiaries will not receive death benefits. Both the benefit amount and insurance costs, and the terms are fairly simple and affordable. This makes term life insurance a good idea for someone looking for a policy that will help out their family financially when they pass away.

Whole Life Insurance: Basic Information

Whole life insurance is intended to last for a policyholder’s whole lifetime, and pays out at any time that they pass away, making it a type of permanent life insurance. Whole life insurance has a cash value element that grows over time where part of the premium is paid into an account. This allows a policyholder to either give up the policy for the money once enough cash value has been built up, or they can borrow against the account. It is important to note that whole life insurance premiums remain the same for as long as the policyholder lives, and the cash value account continues to increase at a fixed rate.

If you are interested in learning more about your life insurance policies in San Diego, California, contact Windfall Insurance Services Inc. for a consultation.