Differences Between Term & Whole Life Insurance

Generally life insurance is a type of insurance policy that you pay for so that your loved ones will receive a financial settlement when you die. This money can be used to pay for your final expenses, any debt that is left, living expenses for your family, college tuition and many other things that your loved ones may need after you are gone.

The two major types of policies are called Term and Whole Life. Whole Life is also commonly called “Universal Life” Insurance, as the two terms are interchangeable. The two types of policies are have very simple meanings.

Term Life is what it sounds to be, that is a policy that is only valid for a certain period of time. Whole life, by contrast, is good for the entire lifetime of the insured.

Price Differences

There are price differences in these two types of insurances and which would be best for you may depend on many factors. Certainly price is a large factor when choosing life insurance. You have to take into account what you can afford.

For this reason, term life insurance is the best in the short run but whole life is considered the better value in the long run. Because term life insurance is only for a specific period of time, it is considerably cheaper than whole life insurance. If the insured does not die during the specified term however, then the insurance policy is null and void with no payout.

Term life is one of the best ways to get the most insurance benefits for the smallest financial investment. Because a whole life policy is for the person’s entire lifetime it will eventually have a payout.

Benefit Differences

Another difference between the two policies that can be very important is that at the end of the Term Policy, the insurer is left with nothing expect his health. With a Whole Life Policy however, the policyholder can take part of the premium and place it into a savings account.

This is beneficial because if there is an emergency, the Whole Life Policy Holder can choose to access that money to obtain quality of life while still alive. These benefits do not come free however. The insurance policy knows they can charge extra for these perks.

Whole Life insurance policies are often much more expensive than term life because there is a guaranteed payout and more benefits while the policyholder is still alive.

Deciding Between The Two

If you are trying to decide between the two types of policies then you need to ask your self a few questions. For example, what would you do with the benefits? Would you pay for your spouses living expenses or college education after you are gone? Do you work a dangerous job where your life is in danger often? If so then Term life insurance may be the best

However, if you have a spouse that has never worked at all, or dependents that may that you are expecting to support for the rest of their lives, then whole life may be a better fit. This is because it offers some financial security while you are still alive if disaster strikes. You will still be able to support your loved ones if you come into a financial hardship.