Choosing life insurance for yourself and your family is one of the most important long-term financial decisions you will make. Although many options currently exist, the reality is that navigating the world of life insurance is not as daunting as some would have you believe. Rather than get bogged down by varying opinions on which type of policy is best, instead schedule an appointment with a knowledgeable financial advisor, who will give you a clear roadmap for your future. In the meantime, here are some basic guidelines for understanding one type of life insurance: the whole life policy.

To begin, let’s first define what we mean by whole life insurance. The most common comparison is with a “term” policy, which simply means that the life insurance is issued for a definitive period of time, and after that time passes the policy is no longer active. Premiums for term policies are often lower than those for whole life insurance, and they are a wise choice for many individuals. Whole life insurance, however, offers a broader range of benefits that you can maximize if you know the ins and outs of this particular form of financial protection.

For starters, whole life insurance is exactly that: for a person’s entire life. Some whole life policies are simply designed to last until the policy holder reaches the ripe age of 100, after which the policy will cancel and the benefit will be paid out. Getting to 100 is a lofty goal, and the fact is that most of us will perhaps fall short of that, which means that whole life insurance can indeed be a savvy financial tool for the long-term desire to protect assets, provide for college and wedding expenses and to create a beefed-up investment portfolio. In other words, whole life insurance can be viewed as a component of an individual’s investment portfolio, rather than as a separate entity.

The main attraction of whole life policies is that they guarantee a payout. Furthermore, you won’t have to face the harsh possibility of not being able to obtain insurance later in life.

Now, this kind of benefit does come with a price. Whole life premiums are by default higher than term premiums because they go the distance, and a percentage of the premium is held in a tax-deferred “cash value” account that grows over time. Canceling a whole life insurance policy means you don’t lose your investment: You are entitled to receive a payment of any cash value you have earned should you decide to terminate the policy. Also, you have the option of taking a loan against the cash value at a competitive and reasonable interest rate; should you die, the payout will be made, minus any unpaid loans and interest.

Some financial advisors will tell you to avoid a whole life policy, preferring instead that you get term life insurance and invest the difference in premiums in another product. However, views about whole life are quickly changing, thanks to two key offerings not available to term clients: estate planning and gifting. With the estate planning perk, for example, the whole life policy can be used to pay estate taxes upon the insured’s death, lessening the burden on family members. Gifting can be a wonderful way to leave something special to a loved one or charity of choice.

For more detailed information about the ins and outs of whole life insurance policies, you should sit down with a skilled and knowledgeable financial planner and hammer out exactly what you need for yourself and your family. This will give you peace of mind and, over time, greater financial stability and confidence.

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