What Is The Difference Between Whole Life Insurance And Term Insurance?
Two of the most popular forms of life insurance are whole life and term life insurance. Although their purpose is the same, overall they are different. It is these differences that determine who purchases what. This also has a bearing on how much of a death benefit is paid to the beneficiaries of the insured.
Both types of policies have their advantages, which is why you want to evaluate them carefully and even make other comparisons like universal versus term life. Some individuals are better suited for whole life insurance, while others are better suited for term life insurance. Evaluate your age, your financial situation, and the needs of you and your family so that you can choose.
Whole Life Insurance
Whole life insurance does come with a larger premium than term, but it doesn't have to be too high. You can have whole life insurance without a hefty price tag. Nevertheless, there is a reason why it is more than term life insurance.
First, the premium is fixed. This means that it does not change throughout the life of the policy. The death benefit does not change either. This is important because this means it does not matter the state of your health, you are always going to pay the same amount.
The death benefit may not be as high, but that's understandable since whole life insurance gains cash value. This means that as soon as you start paying your premium, a portion of it is going to be invested in investments that the insurance company chooses. A return on the investment will then be applied to your policy so that it grows in cash value.
Once you have obtained this cash value, over time it will grow to something you can use if you need it. For instance, you can borrow from the cash value and then pay it back later. This cash value will also be paid out to your beneficiaries in the event of your death. This means that they will have even more money to work with when paying final expenses and getting on their feet.
Term Life Insurance
Term life insurance doesn't have any sort of cash value to it. It is a straight insurance policy. You are also required to submit to a health exam if you choose this option. Whole life insurance doesn't require the health exam. The higher premium compensates for this, so it is possible for individuals of all ages to open a policy.
With term life, you may pay the same premium throughout the life of the 5 to 40 year term, depending on how long you want to be covered. However, you may choose a non-guaranteed premium if you want to save more money. That means that you may only be guaranteed a certain premium for a certain number of Years. After the guarantee period is over, the premium can change.
Term life also expires after the term and the only way to resume coverage is to renew. Because you will be older, the premium will be higher. Nevertheless, many enjoy term life insurance for the fact that the death benefit can be very high and place their family in a good financial position.
Nevertheless, both term and whole life insurance can provide a person's family with a death benefit that will benefit them after your death. There are final expenses to be paid and you may even want to provide your family with an income for a while so that they can get back on their feet. No matter what you want to do, there is a policy that will be the perfect fit.