Life insurance, like all other types of insurance, provides security and protection when things go wrong. In the case of life insurance, it will be the death of the policyholder. By ensuring that the policy is in force, the insured has helped alleviate any potential financial burden (at least for a certain period of time) by providing financial support in the form of life insurance payouts.
However, it is subjective, and may depend on various personal factors. The type of life insurance policy chosen is also specific to the individual’s personal circumstances and preferences. There is no single recommended type for everyone. Therefore it is useful to understand the difference between the two : whole and period.
If you are currently in the market for life insurance, or want to increase the coverage you already have, now is a good time to do so. You can get started by getting a quote today.
Before deciding on the type of insurance policy you want, make sure you understand how the two primary types work.
Whole vs term life insurance
There is no one-size-fits-all answer when it comes to life insurance. You may already have a life insurance type chosen for you by a spouse, family member or employer. But understanding the differences between whole and term can help you make the right decision.
Whole life insurance
Whole life insurance is more expensive because you have more options. Also commonly known as permanent life insurance, this type remains active for the entire lifetime of the insured. There is no policy expiration date. As a result, premiums are relatively high.
But there’s another factor to consider with whole life insurance: the cash and investment side. Some whole life insurance policies pay dividends. You can also build up the dollar value of the policy and cash it out to use for other expenses, loans, and more. This type of life insurance should also be viewed as an investment – as the excess cash received by the insurance company from premiums is invested for you.
In short, whole life insurance is expensive but the benefits can be worth it. If you are interested in exploring your life insurance policies, there are many companies waiting to assist you. Get a price estimate and choose the best policy type for you and your family.
Term life insurance
This type of coverage is self-explanatory. It is limited to a selected period or time frame of your life. It will not last for the entire life span of the policyholder and will need to be renewed. Terms can be 15, 20, 30 years or some other agreed time frame. If the policyholder dies during any of these terms, the policy beneficiaries are paid. If they do not, and the policy is not extended for another period, no payment will be issued.
Term life insurance premiums are generally cheaper than whole life insurance, due to the lack of time and the fact that payments receive a cash-out value. But every time you renew, expect premiums to go up. This is doubly true if you get sick or experience a high-risk medical condition during one of your terms.
Difference between whole and term life insurance
Ultimately, both types of life insurance provide some financial protection to your loved ones if you die. When you purchase life insurance, you can list one or more beneficiaries and determine how you want the proceeds to be distributed. While whole life insurance offers a better option, that doesn’t mean it’s a better option for the policyholder.
To sum it up, here are some key differences between the two policies:
- the length: A whole life insurance policy is not dictated by a pre-determined time frame. A term life insurance policy, on the other hand, includes coverage between a specific time frame (usually between 10 and 30 years) chosen by the policy holder.
- cost: When searching strictly according to cost, term life insurance can be a good route. Sure, it won’t last forever and it, by definition, only offers coverage for a select period. But perhaps this is all that is necessary. This especially applies to young people or those just starting a family who are looking for security but don’t want to break the bank in the process.
- Cash price: With whole life insurance, you can likely receive dividends or withdraw a portion of the cash value (note: it’s usually a good idea to let your money grow before doing this). Term life insurance has no cash value.
Regardless of where you fall on this spectrum and what your personal preferences and circumstances are, most financial experts agree that life insurance is wise. Whether it’s a word or an entire place is not as important as having security.
Remember, policies can always be adjusted and preferences can change (especially as the insured ages) but coverage and protection for you and your family remains important.
Still not sure which life insurance type is right for you? Get a quote and explore your options today.