Shopping around for a life insurance policy can be confusing, especially when you start looking at all of the different types of policy options that are available. Buying the wrong type of life insurance can actually be detrimental, and may leave your loved ones without the financial support they need. The two main types of life insurance to consider are known as term life and whole/permanent life. While there are benefits to both of these types of life insurance, there are also some drawbacks that may make one a better fit than the other. Below, we’ll break down these two types of life insurance to help you decide which one is right for you.
What is Term Life Insurance?
Term life insurance is one of the most basic and budget-friendly life insurance policies you can buy. Term life provides coverage only for a certain time period, or term, because it’s designed to protect your dependents in the event you pass away prematurely. You choose the term length when buying the policy, ideally wanting the term to end around a time period when your dependents won’t need the financial protection anymore; after your property will be paid off, your children will be on their own with their own families, your retirement savings or pension will be substantial, etc.
Term life policy periods can typically be for as few as five years or upwards of 20 to 30 years, up until the age of 65. With most term life policies, both the payout and the premium amounts stay the same throughout the term, but some term life policies do allow for the coverage amount to be increased periodically during the life of the policy. In contrast, others can have a built-in decline in benefits over the years as the insured grows older and more financially stable. The cost of the policy is affected by either option, and your insurance agent will be able to walk you through the pros and cons of these customizable options.
What is Whole Life Insurance?
Whole life insurance, also sometimes called permanent life insurance, has an investment aspect to it in addition to the insurance feature. Whole life insurance, of course, provides lifelong coverage, but has a cash value that grows slowly, is tax-deferred, and can be borrowed against or even surrendered for cash if necessary. Borrowing against a whole life policy won’t reduce death benefits as long as the loan and resulting interest amounts are repaid, but if you surrender the policy, you’ll no longer have that coverage.
There are a wide variety of whole life policies with different features and benefits that can make this type of life insurance policy a great investment, but there are also risks as well. It’s best to review your life insurance options with a reputable state of NJ insurance agent who can help you decide which one of these policy types is the best fit for your financial situation and lifestyle.
About SB One Insurance Agency
At SB One Insurance Agency, we have served the businesses and residents of New Jersey, New York and Pennsylvania for more than 60 years. We are a wholly owned subsidiary of SB One Bank, the region’s premier banking institution, and we are prepared to offer you personal, business, employee benefit, and risk management solutions. To learn more about our coverage options, contact our specialists today at (888) 990-0526.