Q:

How do you decide between term life versus whole life insurance?

A:

Quick Answer

When deciding between term life insurance and whole life insurance, the individual should consider his current financial needs as well as his long-term financial objectives in regards to providing for his dependants and paying future taxes, notes NerdWallet. IRAs and 401ks should also be considered.

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Full Answer

Term life insurance provides coverage for a limited number of years, and whole life insurance offers coverage for the entirety of the policyholder's life, according to NerdWallet. A term policy may be preferable for an individual who desires to ensure his children are cared for until they become independent. Such policies are available for 10, 20 or 30 years. As long as the policyholder pays his premium, he is fully covered by a whole life policy.

Since the policyholder is only insured for a limited amount of time, the premiums for term life insurance policies are usually cheaper than whole life premiums, says NerdWallet. A term life policyholder should be aware that there's a chance his premiums can increase.

The guaranteed cash value of a whole life policy can increase on a tax-deferred basis, notes NerdWallet. The guaranteed cash can also be used for other needs, such as a mortgage or college tuition. Examples of the different types of whole life policies include universal variable, universal and variable.

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