Term Life Insurance Articles
Term vs. Whole Life Insurance
2009-06-16
Navigating the world of life insurance polices can be confusing, and understanding what type of life insurance is best for you is essential. Read on for term life insurance information and whole life insurance details.
There are two main types of life insurance - term life insurance and whole life insurance. Term life insurance is insurance which provides coverage for a limited period of time, or term. If the insured dies during the stated time period, a death benefit will be paid to the beneficiary. Term life insurance is the simplest form of life insurance, and was developed to provide temporary life insurance protection. Since large amounts of term life insurance generally can be purchased for a small initial premium, it is well suited for short-range goals such as providing extra life insurance protection during the child-raising years.
Whole life insurance, on the other hand, is a life insurance policy that remains in force for the insured's entire life and requires premiums to be paid every year into the policy. As these premiums are paid, a cash value is built up that is paid to the beneficiary upon the insured's death. Whole life insurance guarantees that insurance coverage will be in effect when the insured person dies.
The main differences between term life insurance and whole life insurance are the death benefit, payment of premium, and cash value.
In terms of the death benefit, with term life insurance, a benefit will be paid if the insured individual dies during the specified term. If an individual were to obtain a term life insurance policy for twenty years, a death benefit would be paid if a death took place during the twenty year term. A death occurring at any time past the term would not be eligible for a death benefit. Whole life insurance, on the other hand, provides coverage for as long as the individual lives.
Payment of premium also differs with term life insurance and whole life insurance. Premiums for term life insurance policies will increase over time, as the insured individual ages. Premium payment occurs only during the specified term. Whole life insurance premiums, however, are usually level and are paid throughout the insured's life.
Another major difference between term life insurance and whole life insurance is the cash value. Whole life insurance accumulates guaranteed cash values, which can provide money to help with temporary needs or expenses. In some cases, you can borrow against the cash value of the whole life insurance policy, and it may be eligible for dividends.
Term life insurance is best for short term life insurance needs, such as educational expenses for children or paying off a home mortgage or automobile loan. However, if life insurance protection is needed for a longer time period, whole life insurance may be the better choice. Whole life insurance can be used for charitable contributions, end of life expenses, estate taxes, and providing for the financial needs of loved ones.
Making the right choice about life insurance coverage is important. Together, you and your insurance agent can assess your life insurance needs to help you choose the coverage that is best for you.
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Navigating the world of life insurance polices can be confusing, and understanding what type of life insurance is best for you is essential. Read on for term life insurance information and whole life insurance details.
There are two main types of life insurance - term life insurance and whole life insurance. Term life insurance is insurance which provides coverage for a limited period of time, or term. If the insured dies during the stated time period, a death benefit will be paid to the beneficiary. Term life insurance is the simplest form of life insurance, and was developed to provide temporary life insurance protection. Since large amounts of term life insurance generally can be purchased for a small initial premium, it is well suited for short-range goals such as providing extra life insurance protection during the child-raising years.
Whole life insurance, on the other hand, is a life insurance policy that remains in force for the insured's entire life and requires premiums to be paid every year into the policy. As these premiums are paid, a cash value is built up that is paid to the beneficiary upon the insured's death. Whole life insurance guarantees that insurance coverage will be in effect when the insured person dies.
The main differences between term life insurance and whole life insurance are the death benefit, payment of premium, and cash value.
In terms of the death benefit, with term life insurance, a benefit will be paid if the insured individual dies during the specified term. If an individual were to obtain a term life insurance policy for twenty years, a death benefit would be paid if a death took place during the twenty year term. A death occurring at any time past the term would not be eligible for a death benefit. Whole life insurance, on the other hand, provides coverage for as long as the individual lives.
Payment of premium also differs with term life insurance and whole life insurance. Premiums for term life insurance policies will increase over time, as the insured individual ages. Premium payment occurs only during the specified term. Whole life insurance premiums, however, are usually level and are paid throughout the insured's life.
Another major difference between term life insurance and whole life insurance is the cash value. Whole life insurance accumulates guaranteed cash values, which can provide money to help with temporary needs or expenses. In some cases, you can borrow against the cash value of the whole life insurance policy, and it may be eligible for dividends.
Term life insurance is best for short term life insurance needs, such as educational expenses for children or paying off a home mortgage or automobile loan. However, if life insurance protection is needed for a longer time period, whole life insurance may be the better choice. Whole life insurance can be used for charitable contributions, end of life expenses, estate taxes, and providing for the financial needs of loved ones.
Making the right choice about life insurance coverage is important. Together, you and your insurance agent can assess your life insurance needs to help you choose the coverage that is best for you.
