Understanding the Different Types of Life Insurance: Which One is Right for You?

August 16, 2023

Comprehensive financial planning includes investment in the proper life insurance policy. The right policy provides financial security for your family in the event of your death. The right policy offers a lump sum payment for your loved ones to pay for living expenses, your outstanding debts, and future education plans. Finding the right policy may seem intimidating, especially with so many life insurance options. In the blog below, we address some of the most common policy options, such as whole life and term coverage.

Whole Life Insurance Coverage

Whole life policies offer coverage for your lifetime. You get a combination of standard life coverage along with an investment element because these policies generate cash value as well. Whole life is one of the most popular options for those looking for long-term life coverage and the option for increasing value.

One of the most significant benefits of whole life coverage is the guarantee of the death benefit. As long as you keep the policy premiums paid and the policy in force, your loved ones receive the death benefit no matter when you pass away.

The cash value is beneficial because you can borrow against it or liquidate it when necessary. Your cash value is tax-deferred, so you only pay taxes on those gains if you use the money.

Term Life Insurance Solutions

Term coverage offers an alternative to whole-life policies because these policies only extend coverage for a defined period. That coverage period, also called a term, is typically defined in decades. You choose the term that fits your needs. The short-term coverage provided by term policies often costs less than whole life policies, making it ideal when you need short-term coverage for an affordable rate.

Young adults and those with a mortgage or other significant loan find term coverage ideal for ensuring the security of those obligations in the event of their death. Term life death benefits only pay out when the insured passes away while the policy is still in force. At the end of the term, the policy expires unless the policyholder renews for an additional term or converts the policy to another type.

Choosing the Best Life Insurance Options

Selecting the right life policy for your situation depends on your financial goals and your personal needs. Your age, lifestyle, income, and family structure are all relevant to finding the right policy. Consider any financial obligations you have, including those in the long term.

You might prefer whole life coverage if you have significant commitments. You get the benefit of lifelong protection as well as increased cash value. Remember that whole life policies are typically more expensive due to the investment. Term coverage is more affordable and works well for short-term commitments. You may also consider a combination of both whole life and term. Term insurance with a whole life policy can give your family more protection while the kids are in school or for the term of your mortgage. Your whole life coverage stays in place after each of those life stages is complete.

When you contemplate your life insurance options, be sure you understand the difference between whole and term life. Consider your financial goals and your hopes for your loved ones to find the policy that best meets your needs and protects your family.

About 1891 Financial Life

At 1891 Financial Life, we don’t just sell policies, we offer possibilities. We pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. We are a not-for-profit life insurance Society, which means the sales from these financial service products help fund member benefits along with social, educational, and volunteer programs designed to respond to community needs. In 2023, 1891 Financial Life was listed by Forbes as one of "The World's Best Life Insurance Companies."

Our portfolio is extensive, ranging from various life insurance policies to our annuities to support your financial needs no matter what stage of life you’re in.