Term life insurance provides life insurance benefits for a certain amount of time. Suppose you or your spouse passes away at any time during this term (usually 20–30 years). In that case, your beneficiaries (those you’ve selected to inherit your money) will receive a payout from the term life insurance policy.
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Term life insurance plans are significantly more affordable than whole life insurance. However, term life has no cash value until you or your spouse pass away. In the easiest of terms, it’s not worth anything unless one of you were to die during the duration of the policy. That is when you will be given the money. The hope is you will never have to use your term life insurance policy at all—but if something does happen, at least you know you will take care of your family.
The premiums on whole life insurance are, in most cases, more costly than term life premiums for a few reasons. Whole life protection lasts throughout your entire lifetime. It might sound like something good to have life insurance coverage for your whole life. But the truth is, if you practice some simple principles, you will not have to have life insurance forever because you will have insured yourself.
Because you will have no debt, an emergency fund, and a sizable amount of money you have invested. Whole life insurance premiums are more because it’s designed to build cash value (which means it tries to double up as an “investment” account.) But remember and keep in mind that a life insurance policy shouldn’t be an investment or money-making scheme—it’s meant to provide security, protection, and peace of mind for your family should the unthinkable happen.
Life insurance has one thing to do, replace your income when you pass away.
There are more productive and profitable ways to invest your money than using your life insurance plan. Which sounds better to you—investing in growth stock mutual funds so you can enjoy your retirement or “investing” money in a program that’s all based on whether or not you die? We think the answer is pretty straightforward.
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