Final answer:
Term insurance may be a better option than whole life insurance for individuals with specific short-term financial needs. It is more affordable and simpler, providing coverage for a specified period without accumulating cash value.
Step-by-step explanation:
Term Insurance vs. Whole Life Insurance
Term insurance is a temporary life insurance policy that provides coverage for a specified period, usually 10, 20, or 30 years. It is typically more affordable and simpler than whole life insurance. Term insurance may be a better option than whole life insurance for individuals who have specific short-term financial needs, such as paying off a mortgage or ensuring the education of their children.
For example, if a person wants coverage only until their children are financially independent, a 20-year term insurance policy would be a suitable choice. This way, they can have sufficient coverage during the critical years when their children depend on them financially without paying the higher premiums associated with whole life insurance.
Unlike whole life insurance, term insurance does not accumulate cash value or provide lifelong coverage. It is designed to provide a death benefit in case the insured person passes away within the policy term.
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