Life insurance helps provide financial support for beneficiaries if the insured person dies while the policy is in force. When shopping for life insurance, you have several options, including various term life and whole life policies.
Contact Insurance Station in Altoona, Iowa, to learn more about choosing the right life insurance for your situation.
What Is Term Life Insurance?
Term life insurance is a policy that’s in force for a specific amount of time. The “term” of a policy is typically 1, 5, 10, 15 or 20 years. If the insured person dies during the life insurance policy’s term, the designated beneficiaries receive a payout, also called a death benefit.
Term life insurance may cost less than whole life insurance. This type of life insurance also ends automatically when the term is up. If the insured person dies after the term ends, there is no coverage.
What Is Whole Life Insurance?
Whole life insurance, also called permanent life insurance, has a life insurance component and a cash value account. This type of life insurance typically costs more than term life insurance.
Whole life insurance provides coverage for the insured person’s lifetime so long as premiums are paid as agreed. If the policy is active when the insured person dies, their beneficiaries receive the death benefit as stated in the policy documents.
The cash value of a whole life insurance policy may earn interest, helping it to increase in value over time. Eventually, a policyholder may take out a loan against the cash value of their whole life insurance policy. If they no longer need life insurance coverage or don’t want to continue to pay premiums, it may be possible to receive the cash value of the policy minus any fees and terminate coverage.
Why Buy Life Insurance?
Life insurance can be part of a sound financial plan. Beneficiaries can use a death benefit for any reason, including paying everyday bills, paying off a mortgage, handling educational expenses and making charitable contributions.
Many employers provide life insurance benefits to workers as part of a benefits package. However, this coverage is usually equal to just one year’s salary. Life insurance coverage through a workplace terminates when the worker is no longer employed there, which is why many people choose to purchase additional coverage separate from their employer-provided coverage.
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This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.