While many different life insurance policies are offered by many different insurance carriers, they all fall into two main categories: term and whole. But what’s the difference and which type is right for you? We’ve broken down the basics to give you a general understanding. For information more specific to your particular circumstances, contact a qualified agent. But in the meantime, you can educate yourself and make the decision process easier.

Term Life Insurance

Term life insurance is similar to renting an apartment. You buy coverage for a predetermined term—usually 10, 20 or 30 years—and you pay a monthly premium for coverage that lasts the duration of your term. In the event of your death, benefits will be paid to your family to cover living expenses, your final expenses and any outstanding debt that’s left behind.

Just like renewing an apartment lease, your rate can go up when renewing for another term, largely depending on the status of your health (individuals in poor health pose more of a risk for insurers and usually pay more for coverage). For this reason, it’s recommended that you select a longer term at a young age to lock in that lower rate. Term life insurance is a popular choice for young adults and couples without children because it’s the most cost-effective form of life insurance, often costing less than your monthly internet bill.

Whole Life Insurance

In contrast, whole life insurance is similar to owning a house in the sense that it’s a good long-term solution, particularly with families. Once your application is approved, and so long as you keep up with premium payments, your policy cannot be cancelled or dropped by your insurer, regardless of your health. Because coverage is more comprehensive—not to mention, permanent—you can expect the premiums to be higher than those of term life insurance.

Depending on your policy, you may be able to build and utilize guaranteed cash value, also known as living benefits or accelerated death benefits. With this feature, you can borrow money from your policy in order to fulfill a need, such as buying a new home, paying for a hospital stay or funding your child’s college education. In the event of your death, the remaining balance of your policy will be paid out to your beneficiaries.

We’ll help you select the right policy for your needs. Call McFarlin Insurance Agency at (410) 312-7800 for more information on Maryland life insurance.