What is the difference between term life insurance and whole life insurance?
Term life insurance and whole life insurance are two different types of life insurance policies that provide financial protection for your loved ones in the event of your death. While both types of policies can be valuable in different situations, they have some key differences.
Term life insurance is a type of life insurance that provides coverage for a specified period of time, such as 10, 20, or 30 years. If you pass away during the term of the policy, your beneficiaries will receive a death benefit, which is the amount of money specified in the policy. However, if you outlive the term of the policy, the coverage will expire and there will be no death benefit paid out.
Whole life insurance, also known as permanent life insurance, is a type of life insurance that provides coverage for the entirety of your life, as long as you continue to pay the premiums. This type of policy also includes a savings component, where a portion of the premium is invested, and the policy accumulates cash value over time. This cash value can be borrowed against or used to pay premiums.
One of the main differences between term life insurance and whole life insurance is the duration of coverage. Term life insurance is temporary and expires at the end of the term, while whole life insurance provides coverage for the entirety of your life.
Another key difference is the cost. Term life insurance is generally less expensive than whole life insurance, because it only covers you for a specific period of time. Whole life insurance can be more expensive, because it provides lifelong coverage.
Additionally, whole life insurance has more flexibility on the coverage amount and has the option for the cash value component that can provide additional benefits such as a savings component, while term life insurance only provides a death benefit.
It's important to consider your specific needs and budget when choosing between term life insurance and whole life insurance. If you are looking for coverage for a specific period of time, such as to cover a mortgage or children's education, term life insurance might be a good choice. If you want lifelong coverage and additional benefits such as savings component, whole life insurance may be the better option.
The amount of life insurance you need will depend on your specific situation – annual income, debts, family etc. Our team is happy to meet with you to determine the amount of coverage and which life insurance policy is best for you.
Read more about factors that determine how much life insurance you will need: How Much Life Insurance Do I Need?