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Choosing How to Protect Your Family: Term vs. Whole Life Insurance

While some people debate whether term life insurance is better than whole life insurance, it's a little like comparing a hammer and a handsaw. The two are different tools, and which one is the right choice depends on what you are trying to accomplish. Shopping for life insurance should start by defining your goals so you can select the right tool to protect your family.

Once you understand the differences between term and whole life, it is easy to get free quotes on specific policies. You can use these free quotes to shop for discount insurance within each category, or to compare the two categories so you can weigh the costs against the benefits.

Term life insurance offers a stable premium (typically, your monthly payment for the policy) over a specified time period, or term. If you die during that term, your designated beneficiary will receive the policy's death benefit. If you do not die during the policy's term, the policy does not pay any benefit.

Because term life insurance only returns a benefit under specific circumstances, it is typically cheaper than whole life insurance. For young people who are just starting their families, getting a cheap life insurance policy is often the immediate priority. Also, obtaining protection for a specified term suits their needs, since their children will grow up and need less financial protection over time.

Whole life insurance is more complex than term insurance. It is permanent in the sense that it accumulates value rather than only existing for a specified term. Often, whole life insurance has an investment component which may pay dividends to the policy holder and/or let the policy holder participate in investment results.

Because of those added features, whole life insurance is best suited to people whose needs go beyond just obtaining a cheap life insurance policy. Whole life insurance is likely to cost more than term, but it also represents something that builds value. This option may appeal to people who want to start accumulating some investments. This makes it a more complex decision, since you have to evaluate both the insurance benefit and the investment merits of a given policy.

Because of their differences, you shouldn't directly compare the premiums of whole life insurance to those of term insurance. However, you can use the Internet to get free quotes within each category to find discount insurance. This way, you can find the most cost-effective way to protect your family.

About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.

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