Term vs. whole life insurance

Differences between term life insurance and whole life insurance

Two of the best known types of life insurance coverage are term life and whole life. It is important for shoppers to understand the differences in order to get the best coverage at the best possible price.

Term life insurance provides a death benefit payable upon the demise of the policyholder – and only a death benefit. Whole life, on the other hand, adds an element of investment, providing cash value that can build up over time depending on how well the investments do. This cash value can be accessed even while the policyholder is still alive.

For those looking for the protection of life insurance without the high cost, term life insurance can be an excellent choice. The premiums on term life tend to be quite a bit lower than similar whole life policies, providing an affordable alternative for many workers. Term life insurance provides only a death benefit, with no cash value or investment component.

The term of the policy can vary from 5 years to 30 years, at which time the policy can be renewed for another term at a new premium level. Term life can be a good choice for anyone, but the premiums can be particularly low for young and healthy workers.

Whole life insurance coverage provides an element of investment along with a death benefit. Whole life continues to be one of the most popular forms of life insurance coverage, and many workers like the fact that universal life insurance coverage is designed to remain in force for the life of the policyholder. Unlike term life, which must be renewed every so often, universal life remains in effect for the life of the policyholder.