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Whole Life Insurance vs. Term: Which Is Right for You?

Everyone strives to live a long and happy life. However, regardless of how much planning you put into preparing for the future, unexpected accidents still happen. Thinking ahead about the financial well-being of your dependents provides assurance that everything is looked after upon your passing. While considering the possibility of your mortality can feel a bit morbid, it’s important to know your options.

That’s where life insurance comes into the picture. In most cases, there are two types of life insurance to choose from: term life insurance and whole life insurance (also known as permanent insurance). Determining which option is best for you depends on a number of factors, including your immediate needs and financial position.

It’s possible you may decide to go with the affordability of term life insurance, which is most often applied to short-term, temporary periods that are pre-set, such as mortgage coverage. However, if your aim is to have a more substantial, longer-term source of coverage, then you may prefer the lifelong protection and cash value that comes with most whole life insurance.

At Marathon Insurance Group, we understand the impact that a proper life insurance policy has on both you and your family. Finding the right, customizable option in Toronto that suits your needs ensures that your final act of love and legacy will help get them through this difficult moment.

The question then becomes: how do you know which option is best for you? Before jumping into the first policy you come across (right or wrong), it’s important to understand the different options that are available.

Who needs life insurance?

Eventually, the time will come when you can no longer take care of your family. Planning for the future is the best way to protect them from the financial impact of your passing. Life insurance not only ensures that your assets are properly distributed, but also removes the financial burden from your dependents.

In order to provide financial support that covers the immediate and future needs of your loved ones, you need to select the right life insurance policy that suits you.

Term Life Insurance

Of the main two options available, term life insurance is the most straightforward given that it remains in effect during a predetermined period. One of the main reasons to invest in a term life insurance policy is due to the promise of a death benefit for the beneficiary should you pass away during the enforcement period.

As implied by the name, this form of life insurance is only effective for a limited amount of time. Depending on your current needs and choice of timeline, a term life insurance plan can range from 5 years, 20 years, 30 years, or more. Once the specified period ends, the policy expires and you will be required to choose another option in order to continue being covered.

What are the benefits of term life insurance?

The two core elements that make up term life insurance are simplicity and finite duration. As a result, term policies tend to be more affordable than the other options available. When selecting the right policy, if the main thing you’re seeking is the ability to protect your loved ones when you pass, then term life insurance may be an ideal fit.

The lifespan of this policy can extend beyond when your child enters adulthood, providing an additional safety net for anyone who wants that buffer. It’s also a good choice for business owners who are looking to offer key person protection or insurance coverage for individuals that play a significant role in a company. Without risking loss of investment due to staff turnover or unpredictable longevity, term life insurance is a safe way to get coverage without making a long-term commitment.

Overall, term life insurance is an excellent option if you’re looking for an affordable policy that provides temporary protection.

Whole Life Insurance

Whole life insurance (also known as permanent life insurance) differs from term life insurance in two key ways: unlimited expiration and cash value. Although there are sometimes higher premium rates at the start, as long as you continue to make them, the policy will never expire.

In addition, on top of the initial death benefit, your beneficiaries receive an extra cash value that can be a source of funds in the future.

What are the benefits of whole life insurance?

One of the initial benefits of whole life insurance is the option for level premiums, meaning you make the same monthly payments for the full policy duration. These payments are then split in two ways. The first part goes directly towards the insurance component, while the remainder helps grow your cash value over time.

These types of policies are typically “front-loaded”, which means the early premium may cost more than the insurance itself. However, over time it will lessen compared to that of a typical term policy. In addition, after a while, you can choose to borrow or make a withdrawal from your cash value amount to help pay for expenses. Ultimately, whole life insurance acts as a more flexible financial tool than a term life insurance policy.

Why choose whole vs. term life insurance?

When choosing the best policy for you, consider how much of a financial contribution you may need in the long run. If you’re looking for a life insurance policy that will be beneficial for making a large contribution in the future, or you have a significant distribution of assets, such as an estate, then whole life insurance would be the better choice.

With whole life insurance being guaranteed until your passing—not only for a limited period of time—there’s greater assurance that your dependents will have financial security in the long run. Acting as an investment for life, you can build additional cash value that will add to the existing benefits offered.

How to Find the Best Life Insurance Policy

To ensure that you find the best life insurance policy for your ongoing needs, our experts at Marathon Insurance Group can help provide customizable options. To learn more about your whole life insurance options in Toronto, call us at 844-429-0837 or contact us online.

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