Life Insurance Blog

There are many factors which customers can really appreciate about both term life insurance and whole life insurance policies. They are both uniquely designed to offer specialised coverage based upon the policy holder’s needs; needs which can often vary greatly from one policy holder to another. It is wise, however, for policy holders to become familiar with the differences in order to determine which type of life insurance plan is right for them. Below is a list of comparisons between term life insurance and whole life insurance.

Flexibility

Term life insurance is typically most flexible when it comes to term length. Term life policies allow the customer to arrange life insurance which will expire between 5-20 years from inception. Whole life insurance policies, on the other hand, most often begin at 30 years of coverage and expand from there.

Whole life insurance policies, while set for a longer period of time than term life insurance, nonetheless usually allow the policy holder to change the conditions of their coverage at any point during the term. If a whole life policy holder wishes to adjust their coverage to take advantage of a lower premium in the later stages of their plan, they are usually permitted to do so. Term life policy holders, however, are almost always locked into their conditions until their plans expire.

Value

Whole life insurance offers the policy holder many options when it comes to making a sizeable return on their life insurance investment. For example, the policy holder who makes the same monthly payments until their contract expires can build value in their plan and will be awarded a higher cash payout. Another option is to take out a loan against the value of their whole life insurance policy. In either case, the policy holder is free to use the money as they wish. If the policy holder dies while under coverage, the plan will pay out to their beneficiaries, thus ensuring that the value of their policy is not lost.

Term life insurance, on the other hand, only offers a cash payout to beneficiaries in the event of the policy holder’s death during coverage. In the event that the policy holder survives their policy, they will not receive a payout of any kind and will be forced to either renew their coverage or forgo it altogether. This does not necessarily mean that term life insurance carries no value for potential policy holders. The shorter term lengths and lower premiums may provide the policy holder with enough coverage for just the length of time they need, allowing them to save money in other ways.

Cost

Because a whole life insurance policy will often charge the same monthly premium for 30-40 years, the policy holder’s life insurance expenses will be significantly higher than someone who has taken out a term life insurance policy. Some might argue that these sustained monthly payments are earning the policy holder a bigger return on investment later in life, but this assumes the policy holder will outlive their coverage.

Term life insurance does, however, offer great affordability for the budget-conscious customer. By setting a shorter term, the life insurance agency is able to require smaller monthly premiums that will not be as burdensome on the policy holder’s finances. This may not apply if the policy holder elects to renew their term life insurance, which can often result in higher premiums than their previous arrangement.