The Difference Between Term and Whole Life Insurance – What You Need to Know

The difference between term and whole life insurance is important, and if you get the wrong one, you might be in for some difficulty. Because one is good for some situations where the other one isn’t, as well as the opposite. Arming yourself with the right information can lead to a life with your peace of mind intact.

What is Term Insurance?

Term life is one of the most inexpensive kinds of policies that you can purchase. It is generally used in case you die in a specific length of time (usually ten, fifteen or twenty years).

If your career carries a higher-than-average risk factor, or it you like to travel a lot, then term life insurance just might be best for you. Term life does have an expiry date on it, hence the name “term”, and once it does expire, you will either need to renew (usually at a higher rate) or get a different life insurance policy. Term is not the kind of insurance you would get if you think you will die of natural causes.

So What’s Whole Life Insurance?

Whole life is the type of insurance which lasts for your entire life, and is paid out at the time of your death.

Whole life consists of 2 parts; a death benefit and an investment benefit.

So why are there two parts, and how do they differ?

The death benefit is always paid out; however the cash accrual part is mostly money storage, with interest. You pay a bit more than the actual cost of insurance, and this is put into an account, and you can actually withdraw the money. Plus, you can obtain a loan against the account. Or, just don’t touch it, and leave your beneficiaries additional money when you pass away.

In Summary…

So, the difference between term and whole life insurance is pretty straight forward I believe.

With a term insurance policy, it is a preset length of time, and is commonly used if you have a high risk job, and maybe even some high risk pasttimes. If this sounds like your lifestyle, then maybe term life insurance is the right option for you.

Then again, if you are expecting to live to an old age, then whole life is a much better choice.

Another thing to note, there is nothing preventing you from getting both. If you have both, you are better secured than if you only had a single kind. Additionally the pay out is much better with 2 policies than just one.

So maybe even think of getting both term and whole life; this may give you more peace of mind knowing you are really looking after your family even though you are gone.

Do You Have Enough Coverage? FREE Information!

If you pass away, who will take care of your family? Will they still have food on the table? Take a look at more free information about term and whole life insurance, and consider accident insurance, too (it’s really inexpensive).