What’s the difference between term and whole life insurance?



Do you know the difference between term and whole (also called permanent) life insurance? Here’s a simple explanation to help you make future decisions for financially protecting your family.

For starters, your Servicemembers Group Life Insurance (SGLI) is term life insurance that’s automatically issued to all eligible members of the Uniformed Services. Transitioning military members who are covered receive 120 days of SGLI term coverage from their date of separation. 

If you are preparing to transition, you may wonder whether you should buy term or whole life insurance to replace your SGLI when it runs out. Here’s the difference.

Term insurance is pure protection; it doesn’t build cash value. As a result, it’s a fairly low-cost option for buying larger amounts of insurance at younger ages. Generally, either the cost increases or protection decreases as you age, when the risk of death is greater. At a predetermined age such as 65 or 80, coverage usually ends.

With term life insurance, you pay premiums for a specified term (ex. 15 years) and receive insurance protection for that time. Depending on your plan, at the end of the term you may have to re-qualify for coverage or renew at a higher rate if you want to continue your protection. If your health has changed, you may not be able to qualify or you may have to pay a higher rate. USBA’s Long Term 20 and Smart & Lean 15 plans are examples of term coverage

Whole life insurance costs more than term, but builds cash value that grows tax-deferred. This cash value can be used in a variety of ways. For example, you can surrender the policy for its cash value, take loans against it, or use it to purchase paid-up insurance. You can keep whole life insurance for the rest of your life—even if your health changes—as long as you pay the premium. The premium and death benefit generally stay the same while you own the coverage.

Whole life coverage can be a good option for those who may not need a large amount of protection, but want guarantees that premiums won’t go up and coverage won’t end. USBA’s Fifty Plus Whole Life plan is an example of whole life insurance.

Whether you decide to buy term or whole coverage, don’t leave your family unprotected after you transition. For a free consultation about what will work best for you and your family, call 1-800-368-7021 or contact us online.

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