Are You Shopping for Life Insurance?
If so, you’ll want to learn about the two basic types of life insurance: Term and Whole Life.
We have reviewed both types of policies below, and compared the advantages and disadvantages of both types of policies to help you better understand which coverage may be right for you.
Before comparing plans, you’ll want to ask yourself the following questions:
Comparison of Term Life versus Whole Life
There are several differences between whole life insurance and term insurance plans.
Among these differences are how long your coverage will last, the cost of your policy, how long premiums remain the same, and if any cash value builds up inside your policy.
Duration of Coverage
Term Life Insurance – Offers life insurance lasting for a period of up to 30 years. Usually, you may choose a term of 10, 15, 20, 25 or 30 years, depending on your age and the insurer.
Whole Life – Provides guaranteed lifetime life insurance coverage for as long as you live.
Pricing
Whole life usually costs up to 2-3 times more than term insurance.
Cash Value
Whole life insurance may build up some cash value inside your policy over time; whereas, term life is pure protection with no cash value inside the policy.
Level Premiums
Whole life has guaranteed level premiums for your entire lifetime; whereas, term life has level premiums for the duration of your policy term.
Advantages and Disadvantages
The Advantages of Term Life Insurance
Pricing – Term insurance usually costs about 25-30% of the premium charged for the same amount of permanent insurance.
Flexibility – You can select coverage to last for a period of 10, 15, 20, 25 or 30 years.
Easy-to-Understand – With term life if you pass away during the term of your policy, your beneficiary receives the death benefit, if you outlive the term, your coverage expires.
You only pay for life insurance while you need it. Term life offers the most protection at the lowest price, with policies available for almost any budget.
Note: Most term insurance plans offer a conversion privilege, which means you may convert your term life policy into permanent life insurance protection by a certain date stated in the life insurance policy.
In addition, term life may offer the option of renewability, which means you may renew your term life plan when it expires, without having to take any medical exam to prove your insurability.
However, your renewal premium is based on your age at time of renewal for your new term insurance policy.
The Advantages of Whole Life Insurance
Guaranteed Lifetime Protection – Permanent life insurance lasts for your entire lifetime, as long as you pay your premiums on time.
Cash Value – It builds up some cash value inside the policy over time.
Loans Available – You may take a loan from the cash value in your whole life policy.
As long as you pay your premiums on time, your whole life policy will never expire during your lifetime. In addition, you may take a loan from the cash value inside your policy.
Conclusion:
Term Life Insurance is a good option for people who need life insurance protection for 30 years or less, and for those who need the largest amount of coverage for the lowest price.
Whole life insurance is a good option for people who need life insurance that is guaranteed to last for their entire lifetime.
Next Step:
How Much Life Insurance Do You Need?
Use our life insurance needs calculator to help you determine how much insurance you need.
Life Insurance Quotes
Top Pick – JRC Insurance Group
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What is the Difference Between Term and Whole Life Insurance Policies?
Disclosure: Compensated Affiliate