Term Insurance Vs Whole Life

The vast differences when comparing term insurance vs. whole life become apparent quite quickly. Whole life insurance is a complete investment package that pays throughout your whole life, hence the term “whole life”. Term insurance pays for a specified time period and is not really considered an investment for life needs.

While a whole life policy is more expensive, it offers significantly different coverage than a term life policy. Your whole life policy can be borrowed against or cashed out as you build funds. You also won’t lose your money when your “term” is up because there is not “term” period, the money is always yours.

Term insurance is similar to auto, home or disability insurance. It is available for you, if something happens. The something in the case of term life insurance is that your beneficiaries receive it if you die during the time period that you purchased the insurance for. This is especially important for families that are supported by a single wage earner.

While whole life policies usually remain consistent throughout the policy life, a death benefit term life policy cost is generally going to increase over time, but the cost will still be eight to ten times less than that of the whole life policy. As you age, your term policy price can change. The term time may also determine if your rate is going to increase, and by what percentage. Some policies are called “annually renewable”, which means your price will be evaluated each year as well.

Some term insurance policies can actually go down in price as they age. As you age your debt to asset ration usually changes, with this change comes less of a need for a large term life policy. In contrast, with a whole life policy your insurance is an investment that will appreciate over time. Either way if you own property that you want paid for if something were to happen to you, you know it will be paid for.

When deciding if you need a whole or term life insurance policy, it is important to consult a financial adviser. Because of the individual advantages of each product, it is important to do a good comparison based on solid decisions or recommendations.

While most companies will offer various types of insurance, the person selling the policy will have their own motivation. Often policies are sold based on what kind of a commission they will bring in. Comparing the differences and not being rushed into this decision will help you avoid a potentially life long and costly choice.

When you compare term insurance vs. whole life you will have a multitude of options. Once you have decided whether you will choose one over the other, you will still have many choices, each one significant enough to affect your financial picture.