What Is The Difference Between Term Life Insurance And Whole Life Insurance?
Posted July 25, 2009 – 4:23 pm in: term life insuranceTerm life insurance is in effect so long as you pay for it and pays out the face value of the policy at time of death. Whole life is an investment policy. Your premiums earn interest which can be paid back to you, added to the value of the policy or be used to pay the premiums, eventually making the policy self-perpetuating. The face value and any accrued interest is paid out at death, or the policy can be used as a retirement portfolio.
Tags: Between, Difference, Insurance, Life, Term, What, Whole
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Term life insurance offers death benefits only, so if you don’t die, your family gets no money back. Whole life insurance is more expensive, but it is more of an investment. If you are looking for more information on insurance, you could try this site for resources, articles, etc. http://insurance.divinfo.com/
term is a period of time, and whole is your whole life.
Term life is like a car insurance policy or homeowners policy. (whatever you pay for a certain period of time, covers only that period).
Whole life is more expensive, but part of the premium that you pay goes into a savings/equity account that you can utilize later. Sort of like putting the moeny in savings. But I’d call a financial planner (any good one out of the phone book…and get 5 minutes of free advice). Done that many times with lawyers, accountants, etc.
Term life insurance is much cheaper and lasts as long as you make your annual payment.
Whole life means that you pay for years and years and years, and when it’s ‘paid in full’ you’re covered for that amount.
For Term life, it’s a straight bet that you will or will not die within the specified period of time – usually 10, 15, or 20 years. You pay the premium once a year, and for the term – 10- 15-20 years, the premium is the same. When the term expires, if you want to renew it, the price goes up.
For whole life, it’s part bet, part “savings” account. You pay maybe 10X as much, for the same amount of coverage. If you die, you lose the savings part. The younger you are, the lower the premium – and it stays the same every year. As long as you pay it every year, the policy stays in force. After 20 years, you still pay the same amount. And after 40 yeas, and after 60 years. Usually, after you pay the policy for 30 or 40 years, it eventually becomes cheaper than term insurance.
However, I think whole life is a HUGE ripoff, and don’t sell it. It has massive commissions for the agent the first year. Most people keep a whole life policy about 6 years, then cancel it, either for a “different” type of whole life, or for term, or just because they don’t have the money.
A 30 year old man might pay $100 a year for $100,000 of term insurance, and $100 a MONTH for the same amount of whole life insurance. You just get more bang for your buck with term.
BUT. Before you BUY life insurance, of ANY kind, sit down, and say to yourself, ok, self, what do I want this life insurance to DO for me? What’s the GOAL? And most importantly, is there going to be a time when you don’t NEED the insurance any more (like, when you have $1,000,000 in the bank, or the kids are through college, or the house is paid off).
THEN when you’re shopping for life insurance, find the product that meets your pre-defined needs.