Understanding Term Life Quotes and Your Insurance Needs

If you've decided to purchase life insurance, you've probably considered both term and whole life policies. How do you decide which is right for you? Before you make a decision, make sure you understand the benefits of both term and whole life insurance.

Understanding Term Life Insurance

Term life insurance is true to its name--you'll purchase a policy with a fixed term of one to 30 years. During this term, your premium payments will remain stable. As long as your premiums are paid, if you pass away during the agreed term, your beneficiaries will receive the policy's death benefit.

Term life insurance has no cash value. This means if you decide to discontinue your policy, the premiums you paid are lost and you will get no money back. Because it has no cash value, term life quotes are lower than any other type of life insurance.

Term life insurance has two major advantages:

• It offers the most affordable coverage with largest death benefit for your money.
• Premiums generally don't increase for the duration of the term.

Understanding Whole Life Insurance

Whole life insurance is a combination of life insurance and a financial investment. The money you contribute through premiums may be invested in bonds, money market funds or stocks. Over time, a whole-life policy builds cash value against which you can borrow.

Advantages of whole life insurance include:

• If you decide to discontinue your policy before you die, you can collect its cash value. Keep in mind that the cash value of a whole life policy is generally significantly lower than the death benefit amount, particularly in its early years.
• Premiums stay the same, as long as your policy is in force.
• You can borrow against the cash value of a whole life policy.

Whole life insurance also has some disadvantages:

• Premiums are high, because you are paying for the investment as well as insurance protection.
• You can't choose how your money is invested, and can probably find better returns elsewhere, if investment is your goal.

Choosing Your Life Insurance

Term life insurance is your best bet if you simply want to ensure your dependents and debts are taken care of in the event of your death. However, if you're looking for an additional investment, whole life insurance may be the wiser choice. Consider the following before you make your decision.

Term life insurance may be right for you if:

• You enjoy choosing your investments.
• You plan to keep the insurance less than 10 years.
• Your budget is limited.

Whole life insurance may be a better fit if:

• You have a steady income, but have difficulty saving money (a whole life policy can act as "forced savings").
• You plan to keep your insurance for at least 20 years.