Term Life Insurance vs Whole Life - Picking the Best Insurance Plan for Your Family

Many people truly do not understand life insurance. It is not meant to replace saving your money or investing in the stock market. It is simply a tool to protect your family in the event something tragic happens to you or your spouse.

I would consider the process of purchasing life insurance as one of the most important decisions that you will ever make. If you are married, have children or if your family depends upon you to provide for their financial obligations, then you need life insurance. If you are single, or independently wealthy, life insurance may not be necessary. Only you, and your financial consultant can properly assess your financial condition.

Term vs Whole Life Insurance
Once you have established whether or not you need life insurance, you must decide on the type of insurance coverage that you need. The following paragraphs should provide you with enough basic knowledge to help you to decide between term life insurance vs whole life.

In order to make an informed decision, you need to understand the difference between these types of insurance.

Term Life Insurance - Term life insurance is the cheapest form of life insurance currently available. It is relatively easy to understand and is extremely basic in its formation. Term life policies cover an individual for a predetermined period of time. Most people opt for for a 20-year level term plan. This basically keeps your premiums and benefit flat over the next 20 years.

Typically term life insurance policies pay out one payment to your identified beneficiary if you should die during the policy period. You would purchase term life insurance if you want your family's financial obligations to be paid for (such as your mortgage) in the unfortunate case that you should pass away. The major drawback to term life policies is that if you do not die during the policy term, you do not receive any monetary benefits at all.

Whole Life Insurance
The true definition of a whole life policy can be a bit more challenging.
The basic premise is that whole life policies provide death benefit coverage for your entire life. As long as you continue to pay the life insurance premiums on time each month (or annually), you are covered. Whole life insurances premiums are substantially more expensive than premiums for term life insurance policies.

In most cases, whole life insurance policies provide a built in savings feature. This is known as the Cash Surrender Value, or CSV. Think of this part as a return of a portion of your premium. The Cash Surrender Value grows tax-deferred until it is withdrawn. It is, however,affected by such things as mortality rates, the company's earnings, interest rates etc. As the policy holder is guaranteed to receive some form of benefit from the underwriting company, the monthly premiums are much higher. Most honest financial planners would agree that the savings portion alone should not be a major factor when deciding between term life insurance vs whole life.

Obtain FREE Online Life Insurance Quote
In all cases, it makes sense to do some basic research. If you have access to the internet (which I am guessing that most of us do) you can obtain a free online insurance quote. This is an extremely smart place to start and will provide you with a wealth of information.

The tools that provide fast life insurance quotes are pretty easy to do.They basically walk you easily through the choices that you need to make. One popular site is Select Quote. Select Quote compares over 1,000 companies and provides you with the best life insurance rates with respect to products, prices and services. These types of companies can help you learn the difference between term and whole life insurance.