Term life insurance provides coverage for a specific period or term. It is sometimes referred to as temporary insurance. The policy pays cash benefits to the beneficiary if death occurs within the specified period or term. Term insurance provides protection for a specified period of time. Term life insurance is a special kind of life insurance which is designed to sustain a much higher potential payout for a shorter period of time. Term life insurance is very helpful if you are about to make a large change in your life, from buying a home or a car to having a baby or getting married. It allows you to leave more behind should you die before your debt is paid off.
A whole life insurance policy is one can keep for as long as you live and that will pay the face amount to your beneficiaries. Generally there are two types of whole life insurance policies: participating and non participating. A participating policy has cash value and earns dividends if the life insurance company performs efficiently, but dividends are not guaranteed. A non participating policy has cash value. It does not pay dividends. If you keep a whole life insurance policy for a specific period of time, the policy will build up guaranteed cash values which pay a guaranteed interest rate each year accumulating a considerable sum over time.
As a young adult, you have certain advantages when it comes to life insurance. With term life insurance, you get inexpensive protection. Many term life insurance policies offer the option of renewal or conversion to a whole life policy. The whole life policy will continue to grow. If you buy a whole life insurance policy when you are young, you will get life long coverage for lower costs. With whole life insurance, the younger you are, the lesser you pay. But the premium for a whole life insurance policy will be higher than a term life insurance policy, no matter how young you may be. But the distinct advantage of a whole life policy is the cash value. You can borrow against this cash value and you need not pay back this loan. As a young adult, the best option would be a term life policy, especially if you have no dependants and are less than twenty years. If you are looking for long term protection, then you should get a term life policy with an option to renew or convert to a whole life policy. The premiums are low at the beginning but do go up after the conversion.
