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Life insurance is often lauded as the best way to pay outstanding debts and keep loved ones secure after your death, which is why it’s shocking that over 1-in-5 Americans don’t have any. If you’re among those in need of life insurance, there are two basic types to choose from–whole life and term life.

This raises the question of what term life insurance and whole life insurance actually are. Is one better than the other? What are the advantages and disadvantages of whole life vs term life?

Luckily, we’re here to help. We’ll help answer those questions in this article.

Term Life Insurance

Term life insurance, as the name implies, is a type of insurance policy that pays out if the insured dies before a certain amount of time passes. In most cases, this ‘term’ lasts between one and two decades.

The policy is renewable, but you’ll have to pay more. That being said, term life policies are often more affordable than whole life policies. 

Whole Life Insurance

Unlike term life insurance, whole life insurance covers someone until the end of their life, regardless of how long they live. This guarantees that the policy will payout, but the price is often much higher than that of a term life plan.

Another upside is that since you have a plan your whole life, the payout is also likely to be higher.

Premiums and Their Uses

Arguably, the most important thing to consider when discussing whole life vs term life is how high the premiums are and what those premiums do. An insurance premium is the amount of money that is required to set up the policy.

Life insurance premiums are often paid monthly or yearly over the course of the plan’s term. The insurance company has several options regarding what to do with the premiums they collect.

Whole life insurance premiums are often split between money saved for the payout and a bank account that you can access at any time. Term-life insurance, meanwhile, goes entirely towards the final payout. However, there is an optional policy for term life plans known as the Accelerated Benefit Rider that changes this a bit.

Accelerated Benefit Rider

An Accelerated Benefit Rider is an addendum to a term life policy that allows the insured to access their own benefits should they suffer a serious disability or a terminal illness. This allows those who are terminally ill or in need of regular care to pay for some of their treatments, which often come at astronomical costs.

If even your medical bills aren’t an issue, it still helps to have the extra money. What’s on your bucket list? What have you always wanted to try?

You can view rider benefits and additional information by clicking the link.

Whole Life vs Term Life: Which Should You Choose?

When it comes to whole life vs term life, the proper choice depends on the policyholder. Whole life insurance policies tend to yield more and last longer, but not everyone can afford them. Term life policies, meanwhile, are shorter but more affordable, so it might be more realistic to keep a term life policy and extend it when it runs out.

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