subject: Term and Whole Life Insurance – What's the Difference? [print this page] Term and Whole Life Insurance What's the Difference?
I'm going to assume that because you are looking at this article, you already know the importance of life insurance. I'm going to assume you recognize that life can change in an instant. Whether you are the breadwinner of the family or you watch over the children, securing Term or Whole insurance is a safe bet. Let's take a look at the differences.
Term life insurance can be looked at as temporary because it can be purchased in large amounts for a relatively small initial premium and a shorter time period. For those folks who are on a limited budget but want some protection for themselves and their families, term is typically a good fit.
Some use term life to cover needs such as a home mortgage, an auto loan, school expenses, or a loan payoff. It also could provide extra life insurance short-term, perhaps in conjunction with Whole. Term life provides death protection for a stated time period, or term.
Depending on the insurance company you buy from, term life is offered in varying time spans such as 5, 10, 20 and 30 years. It is typically renewable after the term, although the premium will likely change. In fact, the premium may be adjustable during the term of the policy in some cases but will not exceed a set amount that is in the policy. If you are feeling that your term policy isn't enough or you need a change, you can typically convert a term policy to a Whole one.
Where term life is appropriate for short-term planning, Whole life is built for long term financial planning and insurance goals because of the consistent premiums, longer periods of time, cash value and more. It can also be referred to as Permanent insurance. You would consider it for things such as your partner or children's financial needs, estate planning, charity contributions and final expenses.
Whole life insurance offers premiums that stay consistent whereas term life can increase. You can secure this insurance policy for as long as you live and have access to cash in the case of emergencies or unexpected expenses.
Other advantages to Whole Life policies are that some pay dividends and it's possible that your life insurance would be tax free to your beneficiary.
Naturally, different insurance policies offer different benefits and rules. Always be sure to check with several life insurance providers to find the best policy for you. You may need just Term, just Whole or a combination of both.
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