Are you finding it hard to decide between these two highly popular permanent life insurance policies?
Both these insurance policies provide adequate coverage to your loved ones and have many pros and cons. One policy suitable for certain individuals may not be the right choice for others. Thus deciding between them requires you to understand your current situation and future needs. We make it simple for you to decide by drawing comparisons between the two below.
Term life insurance is highly affordable or inexpensive approximately $25 to 430/month, while the Whole Life Insurance is approximately 15 times more expensive than Term Life Insurance owing to some administrative costs and additional features.
Term Life Insurance policy is termed as the ‘pure’ insurance policy which is simplest to buy. You pay a price/premium and receive a lump sum tax-free amount called death benefit at the end of your term. However, the Whole Life Insurance is a little complicated in a way that it includes a savings component along with the price you pay. This tax-free savings component is called cash value and can be withdrawn at any time during the life of the policyholder.
The premiums may increase, stay level, or decrease over the life of policy depending upon the type of term Life Insurance. On the other hand, the whole life insurance incurs level premiums only.
Term Life Insurance is limited by the term period which usually varies between 5 to 30 years. Whole Life Insurance continues until the entire lifetime of an individual.
- Death benefit
The death benefit in both kinds of policy is guaranteed. However, if you have taken a loan on your Whole Life Insurance Policy and you die, the remaining amount of your unpaid loan will be deducted from the death benefit.
The coverage provided by Term Life Insurance is limited by the end of the term period. If you grow older and cross your term period, you need to buy a new policy. Whole Life Insurance coverage is for the entire life.
- Investment vs. Insurance
The Whole Life insurance policy is a combination of insurance and investment while the Term Life insurance is solely an insurance coverage for your beneficiaries. Whole Life Insurance can be used to cover the estate tax.
- Best Shoppers
If you have life-long dependents then the Whole Life Insurance suits you. However, if you only need to provide for your family and children and when they are no longer living with you, and you would not need any more of the financial obligation then, a Term Life insurance would suit you best.
If you need coverage for your family only, term Life insurance is the choice to make. If you plan to build cash value and earn a little on your savings then Whole Life insurance is the answer.
- Risk Factor
There is no risk of losing coverage in the Term Life Insurance and the death benefit is receivable at the end of the term. In Whole Life Insurance, although the risk of losing coverage is absent compared to other permanent life insurance policies but the interest rate your receive is much lower. There are other better investment opportunities to consider.
- Canceling/Surrendering a Policy
You can cancel or surrender a term life policy earlier than the term expires without losing any value and only paying the administrative fee. Such is not the case in the Whole Life Insurance, you have to pay the surrender fee that changes over time and accumulated cash value deducting any loans you had taken.
While choosing a life insurance policy, make sure to discuss with a financial advisor or a life insurance advisor to know in-depth about the pros, cons, terms and conditions, and liabilities of the investment policies. The life insurance advisors like us do not charge for their services and the policy you buy is at the same price as offered by the insurance company providers. We act as brokers only connecting you with the right insurance companies and earning our living through the insurance companies.