Difference Between Term
And Whole Life Insurance
What is the difference between term and whole life insurance? Many life
insurance buyers want an answer to this question.
I will attempt to give
as simple and straightforward an answer as is possible. Let us do this
by defining each policy.
What does term life insurance do, how does whole life insurance differ?
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The Difference Between Term And Whole Life
- Term Life Insurance
If you want life insurance for a limited period of time you need
insurance. You can buy a policy for 5 years, 10 years, 15 years, 20
years, 25 years or 30 years. At the end of each period of time that is
the end of the policy.
If you die within the specified term the face amount of the
policy is paid to your loved ones. If you don't die within this period
the policy simply ends.
is much cheaper than
simply because the life insurance company is at risk for a much shorter period of time.
You may convert your
within specified periods of time. For example, you may convert your 20
year term policy within 12 years of the date of purchase of the policy.
This is just an example. The time period varies with each life insurance
- Whole Life Insurance
As the name implies
whole life insurance
may be kept for the rest of your life. The premiums as a result are much higher than
There is one thing about term policies that helps compensate in some way for the higher premiums.
Because the premiums are so much higher, and because you didn't
die early, the life insurance company returns part of your premiums in
the form of
. These cash values applied to your policy each year accumulate at a guaranteed rate.
In addition, you may earn a
each year on top of your cash value. Dividends are not guaranteed, however.
Whole life or term, which is best for you?
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Life Insurance Policies
Difference Between Term And Whole