Do I need term or whole life insurance?
The decision about which life insurance policy to purchase can be a complicated and frustrating decision and one which can leave a lot of people wondering if they’ve made the right decision. Term life insurance provides customers with insurance over a certain term, whilst whole life insurance provides customers with insurance for their whole lives.
On paper whole life insurance seems a better policy, guaranteeing you a return on your investment and never running out, but it costs around eight times more than term life insurance, which makes it more difficult to decipher between the two.
One of the biggest reasons customers choose term life insurance is the cost, and the fact that term life insurance provides customers with the protection they need, when they need it the most. Term life insurance provides customers with protection whilst they have a mortgage, children to support and a family to raise, and stops protecting a customer when they no longer need it as much, once their mortgage has been paid off, and their children have left home and become financially independent.
Whole life insurance is favoured by customers who prefer to see a return on their investment. The vast majority of term life insurance customers outlive their policy and never see a return on 30 years worth of premium payments.
Whole life insurance customers know that they will eventually see a return on their investment, and those who can afford the extra money to make the payments know that at some point the insurance company will effectively return the money they have invested, and often a little bit more when the customer eventually loses their life, whenever that may be.
Whole life insurance customers are also able to borrow money against their final payout so that later in life, when they don’t need the payout for their family or mortgage anymore.
The choice between life insurance policies usually breaks down to how much money a customer has to spend on their policy, and the most important choice a customer can make is the choice to buy life insurance in the first place.