Some people wonder what the best type of life insurance is when it comes to the two main types, which are term and whole. While there is likely a better type for your situation, there really is not the best option for everyone. The type you purchase will need to offer the benefits you specifically need and that comes with costs you can afford, and a good place to start with choosing is learning the main differences between term and whole life insurance policies. Here are four key differences to understand as you decide which type to buy.

The length of time the policy lasts

The first key difference between term and whole life insurance is the length of time the policy lasts. A whole policy lasts for as long as you live, as long as you pay your premiums and do not let the policy lapse. A term policy lasts for the time stated on the policy. In other words, it is the type of policy you buy for a certain length of time that you must state on the policy. You could have a policy that lasts for only 10 years, or you could have one that lasts for 30 years. This is your choice, and the policy will end after the time frame is up if you are still alive.

The payout guarantee

The second difference in these types of policies involves the guarantee for the payout. A whole life policy offers a guaranteed payout no matter what age you are when you die. A term life policy does not guarantee a payout, as you might outlive the policy. For example, if you purchase a 20-year term life insurance policy when you are 30 years old, the policy would not offer a payout if you live to be 51 years old, as the policy would expire when you reach the age of 50.

The costs

A third difference is the costs of each type of policy. Whole life insurance always costs more for a policy, as it offers a guaranteed payout, while term life is always less expensive because there is always a chance your insurance company will not have to offer a payout on the policy.

The ability to have cash value

The fourth key difference to understand involves the ability a policy has to have cash value that you can draw from. When you have term life, your policy will not have a cash value that you can borrow or take out by closing the policy. A whole life policy generally does have cash value, though, and you can borrow this money, or you can keep all the money by canceling your policy.

If you would like more information about term life or whole life, contact an insurance agency that sells life insurance policies or go to a site like https://www.dainsurance.com/.

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