Often the choice between term and whole life insurance is easily decided by the policyholder’s financial situation or stage in life. For many others, the choice may be less obvious.
Whole life insurance offers several things term-life cannot. Edward E. Graves, author of “McGill’s Life Insurance” said a benefit of whole life insurance is that it offers coverage without the need to renew. Although premiums can be more expensive when it comes to renewing a term life policy, whole life insurance offers a cash value component that grows over time.
A recent survey by Guardian Life Insurance found that more people under the age of 40 are now purchasing whole life insurance.
Unless you choose to buy a renewal-of-premium term policy, you will get no money back once your term-life contract expires. The prospect of getting additional cash value out of a permanent policy can make it more appealing to some.
“Term insurance is generally converted to permanent insurance when a customer’s needs have changed and a permanent policy is needed,” said David Theile, Director in Life/Health Product Management at State Farm.
Still, there are others who have little need for a long-term commitment, are not interested in the investment component of a whole life policy, and only have a need for basic protection.
Either way, you should carefully assess your life and financial situation and see which policy is best for you.