The main difference between term life insurance and whole life insurance lies in the duration of the coverage, the cost, and the cash value component:
Duration of Coverage:
Term Life Insurance: This type provides coverage for a specific period or "term" (e.g., 10, 20, 30 years). If the insured person dies within this term, the policy pays a death benefit to the beneficiaries. If the term expires and the policyholder is still living, the coverage ends unless it is renewed or converted to a permanent policy.
Whole Life Insurance: This type provides coverage for the insured's entire life, as long as premiums are paid. There is no expiration date as long as the policy conditions are met.
Cost of Premiums:
Term Life Insurance: Generally, term life insurance is less expensive than whole life insurance when initially purchased. This is because it only covers a set period and does not build cash value.
Whole Life Insurance: Premiums are higher because this insurance is designed to last for a lifetime and includes a cash value component, which acts as a savings or investment element.
Cash Value:
Term Life Insurance: Does not include a cash value component. The premiums paid are solely for life insurance coverage.
Whole Life Insurance: Includes a cash value component that grows over time at a guaranteed rate. Policyholders can borrow against the cash value or even surrender the policy for its cash value in some circumstances.
Purpose and Suitability:
Term Life Insurance: Often chosen for temporary needs, such as providing financial security during child-rearing years or covering a mortgage.
Whole Life Insurance: Often chosen for long-term financial planning, offering both an inheritance and a potential source of savings which can be used during the policyholder's life.
Choosing between term and whole life insurance depends on individual financial needs, goals, and circumstances.
Contact our office today to look over your options.
630-802-3301
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