Term or Cash Value Life Insurance - Which is Best

| April 23, 2015

Most people today understand the importance of insuring their lives. This is especially important if you have a family to care for, and there are two basic types of policies when it comes to life insurance. Some are term policies and others are known as cash value policies. But which is the best one for you? Let's look at the pros and cons of each choice, to help you make an informed decision.

Term Insurance
The word term denotes a specific amount of time. In other words, you can take out a term life insurance policy for ten years, 20 years, or maybe 30 years. You make monthly, quarterly, or annual payments, and the policy stays in force until it expires. Some policies can be renewed annually, while others let you lock in the payments for the entire term of the policy. If you were to die during the life of the policy, your beneficiary will receive the payout as long as the payments are current.

Pros of Term Insurance
Many people choose term policies because they are the most affordable option, and you can get the most coverage for your money. This may be a good choice for someone that wants maximum coverage with the lowest premiums. Most policies have no waiting periods or special fees.

Term Insurance Cons
Term policies do not accumulate any kind of cash value. After the policy term expires, it can be more difficult to get insurance, especially if you are ill or you smoke. Some policies have options like guaranteed renewal, but they can be more expensive.

Cash Value Insurance
A cash value policy is designed to insure your life and provide an investment at the same time. Most of these policies are known as whole life insurance or universal life, and there are several variations to consider. When you take out a policy, the benefits and payments stay the same during the life of the policy.

Pros of a Cash Value Policy
Your policy will never expire as it is good for your "whole life". No matter if you become ill, the premiums will not go up. Over time, the policy develops a cash value. You can borrow this money for anything you want, and you even have the option of cashing in the policy. The growth on this kind of investment is guaranteed.

Cash Value Cons
These policies are more expensive than term policies. The return on your investment may not be as high as other options, but you take fewer risks. Some policies can be difficult to understand, and you need to make sure that you choose a reputable company, to avoid hassles.

Once you decide to take out a life insurance policy, you are making an excellent choice for the well-being of your family. No one can accurately predict the future and it's always best to know that you have things taken care of should unexpected tragedy strike. If you have little money to spend today, you may want to consider term insurance. However, a cash value option can be a good investment. Talk to your insurance specialist about all of the available options. A good insurance person is there to help you make the best decisions for today and tomorrow.