The very names of these two types of insurance pretty much defines the primary difference in the two products. The difference between whole life and term insurance is whole life insurance is something that you purchase for coverage your entire, whole, life. Term life insurance is a product that you purchase to cover a specific time period, term, during your lifetime. This difference triggers other factors within these products that further differentiate them.
The Cost Difference
Because term life insurance is for a shorter, fixed period of time the cost can be significantly less. For instance, a 20 year old male who purchases a 10 year term insurance policy would get a steep discount. The reason being is that a 20 year old male would be purchasing a policy that would run until their 30th birthday. The term insurance coverage would completely end at the end of 10 years. Obviously, a 20 year old purchasing 10 year term insurance has a lower chance of dying within 10 years than an 80 year old. A 10 year term policy for an 80 year old would be higher than that of a 20 year old. Also, the whole life coverage for an entire lifetime would be significantly more than term insurance.
The Cash Value Difference
Another significant difference in the 2 policies is that whole life builds a cash value. The cash value that builds in your whole life policy can be used for different purposes. These purposes include paying your premium as the cash value grows, borrowing or withdrawing cash. Over time your cash value in a whole life policy will grow.
The Time Frame Difference
A third significant distinction between the two types of insurance is that whole life spans your lifetime. Therefore, whole life cannot be cancelled due to health issues. Term life, once the term expires, may not b
e rewritten due to health problems. This means that when you need insurance the most, with term life it may not be available.
A final factor to consider with term life insurance is the time frame of your need for insurance. If you have young children, you will want to select a term that will run until they complete college. There are several considerations with your family that will affect the years you will wish to have term insurance coverage.
To learn more about life insurance and what best fits your budget and requirements contact our Life Department.