Which Is Better Term Or Whole Life Insurance?
First of all, you need to understand the different types of life insurance and what each type of life insurance covers. Life insurance is very important and purchasing one is in both yours and your family’s best interest. Life insurance provides a safety net for unforeseeable situations. With life insurance coverage you can go about living your best life and in case something unpredictable happens whatever expenses you might have tied yourself and your family to will not be an unbearable burden.
Life insurance helps with big expenses in case the main income provider - if that person is insured - is no longer capable to provide because of loss of income or loss of life.
Term life insurance
As the name implies, term life insurance is for a specific term or period of time. The most common term life insurances are for 5,10,20 or 30 years. They can be longer but they would be more expensive as the risk of death increases with time and age. The premium payments are fixed throughout the timeline and they are established when you purchase the insurance.
Term life insurance has the sole role of providing insurance in case of death. It can not be used as an investment as it does not have a cash value. Term life insurance is the least expensive option but it does have an end date. When that end date comes the insured, if interested, would have to make another term life insurance at the current policy calculations or change it into whole or universal life insurance if the company allows it.
Whole life insurance
The most expensive and most rigid of insurances. They are for life and besides the death benefit, they also have a cash value. This means that the insurance itself is split into two parts, one for coverage, the other for investment. During long periods of time the investment part of the insurance can increase its cash value which would make the final death benefit increase as well.
Whole life insurance is not something to be used for investment but it does have that added benefit. They offer coverage for life and from the cash value you can take money out during your life but still have the death benefit untouched. This will decrease the end benefit but it does offer the option.
Whole life insurance can be terminated and cashed out but this will add some extra payments. But in case the life insurance itself is no longer necessary, for example, you reach 70 years old and you no longer have a beneficiary, you can cash out the policy for its current value and invest the saved money in your retirement.
Popular Insurance Questions
Popular Insurance Glossary Terms
Type of policy with premiums that are fully paid up within a stated period. For example, a 20-payment life insurance policy has 20 annual premium payments, with no further premiums to be ...
Bond issued to a contractor guaranteeing that the supplier (individual posting the bond) will provide all of the necessary materials for the satisfactory completion of the contracted ...
Shortened report showing pertinent insurance policy information, copies of which are distributed in the insurance company's home office and branch offices, as well as to agents and brokers. ...
Policy whose premiums, cash value, and face amount are guaranteed (all values are fixed and do not fluctuate according to the loss experience, expenses, and investment returns of the ...
Coverage for an insured whose property is damaged or destroyed by an insured peril, or whose negligent acts or omissions damage or destroy another party's property or cause bodily injury to ...
Behavior or character standing of an individual in a community. Some personal habits are considered in underwriting an insurance application. ...
Average interest earned by an insurer on its investments after investment expense, but before federal income tax. ...
request by an insured for indemnification by an insurance company for loss incurred from an insured peril. ...
Clause in the Standard Fire Policy and many other property insurance policies that excepts coverage for losses caused by riot or civil commotion. Coverage for riot and civil commotion can ...
Have a question or comment?
We're here to help.