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Life Insurance

The Difference Between Term and Whole Life Insurance

By October 15, 2018 No Comments
life insurance

Life insurance provides financial protection that covers final expenses in the event of your death. The valuable coverage is available for men and women of all ages, giving them comfort and security knowing that their funeral expenses are paid for and that their family has a nest egg to survive off of.

That being said, life insurance can be quite confusing, especially if you’ve never purchased a policy before. There are terms to know and understand, different types of coverage, different payouts and limitations, and even different types of policies. Anyone interested in life insurance should take the time to learn more about the coverage before buying a policy.

insurance policy

Types of Life Insurance

Term life and whole life insurance policies offer individuals protection but each type of coverage has its own pros and cons. Term life insurance, for example, pays out a death benefit but does not build cash value like the whole insurance policy. The price point is another one of the biggest differences in the two types of policies.

Term life coverage is, for most people, considerably cheaper than whole life insurance but the price of coverage varies considerably from one person to the next. It is essential to learn more about whole life and term life before investing your money. Most experts agree that term life insurance coverage suffices enough for most individuals.

Again, it is up to you to research and learn more about the policies to determine which is best for your needs.

What is Term Life Insurance?

Term life insurance provides a death benefits-only policy that pays final expenses only if you die during the term of the policy. It is much easier to buy than whole life coverage, with options to suit every need.

Anyone that wants term life coverage can purchase a policy in a matter of minutes if they so choose, unlike whole life coverage that requires medical exams and other qualifications to be met. Term life is available for a set period of time, or ‘term,’ of your choosing. Policy terms can be 5, 10, 15, 20, or even 30 years.

If you die during the term of the policy, death benefits are paid that covers the costs of final/funeral expenses. Most young people prefer a term life policy, but it is especially beneficial for older individuals with health problems that cause them to be denied for whole life insurance coverage.

whole life insurance

What is Whole Life Insurance?

Term life insurance can be converted to whole life if you change your mind later down the line or if your circumstances change. Whole life insurance is more expensive than term life, but provides more thorough coverage. When you buy whole life insurance, you gain a lifetime of protection, so long as your policy is in effect.

Not only does whole life offer a death benefit, it builds cash value that you can borrow against during the life of the policy. It does take 12+ years to build a significant cash value on most policies, however. Most whole life insurance providers require applicants to complete a physical before approving for coverage.

How Much Does Life Insurance Cost?

Whether you choose term life or whole life insurance, the cost of the policy is important. Sadly, there isn’t a one-size-fits-all pricing scheme, so just about everyone who applies for coverage will pay a different amount for the coverage. Some of the factors that impact insurance costs include:

  • Whole life or term life coverage
  • Amount of the policy
  • Duration of the policy
  • Residence location
  • Age
  • Current health conditions

Free estimates provide details about pricing so you can choose the rates that work best for your budget. Request three to four estimates and compare rates and companies. You deserve the best policy possible when buying life insurance coverage.

Which Policy Type is Best?

It is important to review both term life and whole life insurance before choosing the best policy for your needs. When you invest your money in the right type of insurance policy, there are both short-term and long-term benefits waiting. Many people find that term life insurance provides the right amount of peace of mind at a considerable less cost than a whole life policy.

Others want maximum protection and aren’t satisfied with the minimal. This differs from one family to another and from one situation to the next. This is why it is so important to learn more about each type of insurance and the ways that it can help you thrive. When determining which policy is best for you, consider the following factors:

  • Current health status
  • Age
  • Family’s financial needs
  • Cost of long-term health care expenses vs. life insurance policy costs
  • Needs of the family in the future

When to Buy Term and When to Buy Whole Life Insurance

Is term life insurance right for your needs? Most people will do well with a low-cost term life insurance policy. Individuals who do best with term life insurance include:

  • You need insurance to cover you for a specific period of time
  • You need affordable coverage that meets your budget requirements

But, whole life coverage is still an option. Obviously people need it and use it, otherwise, it wouldn’t be available.

life insurance

Choose Whole Life Insurance If:

  • You want to build cash value that you can borrow against
  • You want to provide money to cover estate tax expenses to your heirs
  • You have a dependant or have a child with special needs
  • You want to equalize an inheritance
  • You do not want coverage for a set period of time

Final Thoughts

Life insurance is a necessity for every individual out there, regardless of their age, health status, etc.  It provides financial protection that is second-to-none and available through no other coverage.

However, choosing between a term life and a whole life policy can be confusing if you aren’t familiar with the policies and what they offer. Put the information here to use and alleviate much of a headache and hassle that you endure when buying a life insurance policy.

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