Term Life vs. Whole Life Insurance

Determining the life insurance policy that is best for you takes a fair amount of research. First, evaluate the basic categories of life insurance – term life insurance and whole life insurance, which is a type of permanent life insurance. If you decide that a term policy best meets your needs, you can move on to evaluating insurance companies. If a permanent policy is a better match, your next step will be to review the different types of permanent life insurance policies available before researching companies.

To assist with your investigation, Life Insurance Questions provides this valuable comparison of permanent life insurance and term life insurance. The following chart is compiled from comparison information obtained from the State Farm Insurance web site:

	Term Life Insurance	Permanent Life Insurance
Coverage	Specific period of time, or “term”	As long as you live
Best suited for	Short-range goals	Long-range goals
Financially, best for	Those with a more limited budget	Those with more financial means
Premium	Lower cost, but increases when policy is renewed	Higher cost, but stays the same for entire policy
Money available to borrow?	No, doesn’t earn any cash value	Yes, cash value can be borrowed against tax free; will decrease the death benefit
Death benefit	Death benefit provided for the specified time period	Death benefit provided for as long as you live
Cash Value	Does not accumulate cash value	Accumulates cash values, on a tax-deferred basis

Other Considerations Regarding Life Insurance

It is important to note that, in some instances, a combination of both term and permanent policies may be the best fit. Additionally, while term life insurance may be a starting point for some because of their financial situation and needs, term policies can be converted to a permanent policy any time prior to age 75. So, if your goal is to obtain permanent life insurance, but you cannot afford it financially, you may consider obtaining the term coverage now and converting to a permanent policy later.