Term vs. Whole Life Insurance, According to people, term life insurance seems to be a better option because it cheaper than whole life insurance. But the truth is that it offers a limited year for coverage. The actual difference between term and whole life insurance has to do with the cost and length. You can afford term life insurance cheaper than whole life insurance. The term life insurance only covers a set period of time and pays you if you die during the term.
Whole life insurance covers the entire moment of your life, meaning it lasts your entire life. Plus, it also includes an investment account, the makes it more complex and expensive. Both policies include a payout known as a death benefit in which your loved one can spend on funeral expenses, mortgage payments, college tuition, and more. Keep in mind, these depend on what coverage you need because there is various types of life insurance suitable for you.
Overview of Term vs. Whole Life Insurance
For you to understand the difference between term life and whole life insurance, we will provide you with a breakdown on each of the insurance coverage.
What is Term Life Insurance?
Term life is one of the types of life insurance that works very simply. It provides you with life insurance coverage for a particular period of terms which includes 10 or 20 years and then pays you off if you die during the terms and policy. The disadvantage is that if you live longer than the set period of time of the terms and coverage provided, your beneficiaries or loved one won’t receive money. In most policies, you can find out that the death benefit and the insurance premiums stay.
What is Whole Life?
Whole life is another type of life insurance which is a common type of permanent life insurance. It more expensive than term life. The reason why it more expensive than Term life is that it offers lifelong coverage and even pays your insurance funds to your family regardless of when you die. It also includes an investment component known as a cash-value account. A portion of your premium plan is paid into the account and increases over time.
The fact about whole life insurance is that it more complicated than term life. The way the whole life insurance operates is more straightforward than various types of permanent life insurance.
Term vs. Whole Life Insurance: Policy Features
| Policy | Term Life | Whole Life |
| Choice of policy length | Yes | No |
| Accumulates cash value | No | Yes |
| Provides lifelong coverage | No | Yes |
| Premiums typically stay the same | Yes | Yes |
| Eligibility for annual dividends | No | Yes |
| Life insurance payout amount is guaranteed | Yes | Yes |
| Low premium | Yes | No |
Cost of Term and Whole Life Insurance
Just like I stated earlier, term life insurance is cheaper the whole life insurance because if it set period of time and it comes with no cash value. The whole life insurance premium price is higher because it comes with an unlimited set of time and also has a cash value.
| Person covered | 20-year term life | 30-year term life | Whole life |
| Male, 30 | $229 | $358 | $4,308 |
| Female, 30 | $193 | $300 | $3,802 |
| Male, 40 | $341 | $595 | $6,388 |
| Female, 40 | $289 | $476 | $5, 467 |
| Male, 50 | $840 | $1,506 | $9,875 |
| Female, 50 | $654 | $1,137 | $8,347 |
In conclusion, these are the following cash you receive based on the years you live while on term life insurance. Other life insurance options you can also try out include universal life insurance, variable life insurance or variable universal life insurance, and indexed universal life insurance.