Term life insurance is temporary coverage that lasts for a specific number of years, usually 10, 15, 20, or 30 years. If you outlive the term of the policy, the life insurance expires. Term life does not build cash value within the policy. It is not an investment, but pure protection. Whole life insurance is permanent life insurance for your entire lifetime, as long as you pay the premiums. It builds cash value within the policy. You may be able to take a loan out from the cash that builds inside the policy.
The key difference between life insurance and whole life insurance is that regular life insurance carries a fixed term while whole life insurance covers one's entire lifetime. Whole life insurance also accumulates a cash value that one can borrow money against.
Term life insurance is only life coverage. When the person who is insured dies, the beneficiary receives the amount of the policy. Whole life insurance is a term life policy combined with an investment. This policy builds value.
The basic difference between long term life insurance and whole life insurance is that a term policy is life coverage only and this is also considered an advantage. One can buy a long term life insurance for periods of one year to 30 years, whereas whole life insurance is a combination of a term policy with an investment component.
The basic difference between term and whole life insurance is this: A term policy is life coverage only. On the death of the insured it pays the face amount of the policy to the named beneficiary. You can buy term for periods of one year to 30 years. Whole life insurance, on the other hand, combines a term policy with an investment component. The investment could be in bonds and money-market instruments or stocks. The policy builds cash value that you can borrow against. The three most common types of whole life insurance are traditional whole life policies, universal and variable. With both whole life and term, you can lock in the same monthly payment over the life of the policy.
Life insurance is a more general concept that may refer to either whole life insurance or term life insurance. Whole life insurance gathers value the longer you have it, whereas Term life insurance does not obtain any value that you may use before you die. Term life insurance only pays out when you die.
There are man yfactors that go into the rates for insurance, but term life insurance is generally cheaper because it only stays valid for the amount of time stated within the policuy, but as whole life insurance is good for ones whole life you will generally have it paid off after 10 to 20 years.
Term life is insurance is only valid for the given period of time within the policy as whole life insurance coverage is for the entire duration of ones life.
When deciding what type of life insurance to get, someone can choose between term and whole life insurance. Term insurance pays out when a person dies and whole life can be cashed in if you need the money early.
Whole life insurance delivers coverage for the lifetime of the policy holder. It guarantees a fixed premium which can build cash value (which usually cannot be withdrawn without cashing the policy out). Term life insurance guarantees a fixed premium for a shorter period of time, and builds a better and more usuable cash value than whole life. At the end of the term policy the holder must either sign up for another term or forfeit coverage.
whole life provides a life cover amount, available over whole life of assured, while term assurance provides a specific amount of life cover available only over a restricted length of time.
Whole life combines savings with a life insurance policy. Term life is just the policy and is generally much cheaper. A smart invester would never buy whole life until all other savings are maxed out (IRA's, 401K, etc.) and it is the last resort. David Bach (Author of "Smart Couples Finish Rich") says to buy Term Life Insurance and invest the difference. Many times with a whole life policy, your life insurance goes up and down inside of the policy. So you are saving very little over the years, certainly not enough to retire. Putting your money into a Term policy and the difference into an IRA or increase your 401K contribution is much smarter in the long run. The significant difference between whole and term life insurance can boil down to the fact that at the end of the day, a term life policy offers only life coverage. Unlike whole life insurance that adds on an investment component. This in turn makes whole life insurance policies much more expensive. This extra cost might make sense if the investments assured rich pay offs. But this is not always the case. Marketed as retirement funds or forced savings, it has to be said that there are several more effective ways to invest your money. Many of these policies come along with commissions and high fees. In comparison, term life policies are inexpensive. And if you are smart enough to purchase your policy when you are young and healthy, the returns far outweigh the modest premiums.