What Is The Difference Between Whole And Term Life Insurance?

By Patrick Cooper Posted in Life Insurance News

Whole Insurance (WL) can be described as a policy that has capability of saving money for your “whole” life, but, also, has insurance protection. Term Insurance (TI) is precisely that, premiums are for a specific period of time. Both have great value for almost any age group. But, when discussing the difference between Whole and Term Insurance, the “cost” becomes the most confusing part.

Two Very Different Types Of Insurance

WL allows a person to include a type of “savings” program along with the insurance portion of the policy. As time goes by, the policy value can grow according to a specific guaranteed rate of return.

However, don’t be persuaded that TI, which is much less expensive on a monthly basis, is a better value. The truth is, whether you have WL or TI, the “cost” of the insurance portion of the policy is pretty much the same – there will be some slight variables, of course. The only reason the WL seems more expensive, isn’t because the insurance costs more, but because you are, also, using the WL to save money, usually, in a tax-advantaged policy.

Term Insurance does something very strange; it expires worthless. In other words, the policy has no value if you haven’t “expired” when your coverage “expires.” And, of course, the cost of renewal will be higher.

Finally, if you have only TI, it is recommended that you should begin a savings program, as well. It makes sense that you should do both, right? You should prepare a plan that provides for your family upon your demise, but plan to have money to live on, if you don’t die too soon. Thus, the creation of the Whole Life policy!

Related posts:

  1. What Is Term Life Insurance?
  2. What Is Life Insurance?
  3. What Is Term Insurance For Low Cost Life Insurance?
  4. What Is A Level Premium Term Life Insurance Policy?
  5. What Is A Return Of Premium Life Insurance Premium?

One Response to “What Is The Difference Between Whole And Term Life Insurance?”

  1. rbuckner says:

    Whole life is more expensive because you pay level premiums for life. You overpay in your early years, then after age 70, you underpay. In the first several years, the cash value build up is not very much, due to agent commissions and fees. At age 40, a term policy for a healthy male, on a 20-year level term, is about $.70 per thousand. A whole life policy on the same individual is about $13-$14 per thousand. In 95% of situations, most people can’t afford whole life. If you take someone who makes $50,000 or $60,000 per year, and needs $1 million dollars in coverage, and is age 40, can he really afford $13,000 or $14,000 per year after-tax money going into a whole life policy. Most likely not, but they still need the $1 million coverage. The most important thing is to make sure that you have the correct death benefit to protect your family in the event of a premature death. If you have the money and can afford a permanent plan, then it would be worth the purchase.$

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