What is the Difference Between Whole Life, and Term Life Insurance?
Whole Life Insurance is meant to cover you for our entire life, or until you die. This lifelong policy tends to be more complex than term life insurance, but there are key differences. This policy is for lifelong coverage. The premiums are generally set. The payout amount is guaranteed, and there is a cash value amount that grows at a guaranteed rate that you can also borrow against in the future. If you choose to surrender the policy before death, then the accumulated cash value amount may be claimed.
Term Life Insurance is meant to cover you for a set term, or a certain period. Generally, term life insurance policies may run for 10, 20, or 30 years. The monthly premiums are generally lower than a whole life insurance policy because coverage is for a shorter term. The payout amount is guaranteed, but unlike the whole life insurance there is also no cash value that is built. Term life insurance is often purchased to ensure that if you die prematurely that your beneficiaries are protected financially. So when deciding on how long the policy should run it is generally based on how long you want your dependents covered financially in the case you die prematurely.
While there are differences to Whole Life Insurance and Term Life Insurance, they both offer a financial safety net to your survivors after your death.