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Price Differences
Because Term Life has a structured beginning and end, typically from 1 to 30 years, it is normally quite a bit cheaper than Whole Life. That is because under Whole Life it is assured that the insurer will eventually pay out (as we all eventually die). Under Term Life, however, there is a very good chance that you will live through the period of the policy and thus the insurance company can simply take your premiums without ever having to pay out anything.
Benefits Differences
Another important distinction between Term and Whole Life is the fact that at the end of the Term Policy, the policyholder is left with nothing but his own health. On the other hand, with a Whole Life Policy the insurer often takes a portion of the premium and places it into a savings account for the policyholder. In case of emergency later in life, the Whole Life Policy Holder can access that money to meet some needs while still living. As you can imagine, the Insurance Company raises the price they charge for access to all of this.
Deciding Between the Two
Why Buy Level Term Life Insurance? Term life insurance is often called temporary life insurance. Term life insurance is purchased to cover some type of asset over a fixed period of time. Term life has much lower rates than permanent plans because of these shorter time periods. Level term insurance is purchased to cover short intermediate-term obligations. The time periods can be 5, 10, 15, and sometimes 20 years. Short term debt is often covered by a level term policy. Family budgets are full of short term debt obligations. Families buy automobiles, appliances, furniture, and many other household goods and are in debt for these ..
So, how does one decide between Term and Whole Life Insurance? To best answer that question it is important to ask why you need the insurance in the first place. Is it because you have young children and a spouse who does not have the earning potential to get your children through college? Or is it because you work in a dangerous industry and will regularly face the prospect of death over the next few years? These are both excellent candidates for Term Life Insurance. In the first case, it is important that the provider ensure enough financial support for approximately 10 years and then the need drops off, while the second example may require a shorter 3 - 5 year Term Life Policy.
On the other hand, let's imagine that you have a mentally handicapped person you will support indefinitely, or a spouse that has never worked at all. These may be better candidates for Whole Life as the financial need they feel responsible for extends not only to some definite period in the future, but as long as the other person is alive. Under these circumstances, paying the premium for Whole Life might be worthwhile.
Term and Whole Life Insurance fill an important void in many lives by providing some assurance that in case of an accident, loved ones will not be left stranded. It is important to remember, however, that the policies are not panaceas. The savings rate on Whole Life Policies is usually dismal compared to open market rates, and with Term, you are making payments on a product you may never use. Ultimately, the decision to purchase either of these products should involve weighing your personal risk and health, your current and expected financial situation, and alternative uses for funds you have earmarked for a policy.
Life Insurance: Term Or Universal?Deciding on the wrong life insurance plan might leave a family without financial resources at the worst possible time.
Choosing between term and universal life insurance plans can be confusing. Only with some research and planning can a responsible choice be made.
Do You Even Need Life Insurance?
Before deciding between term and universal coverage, consumers need to determine whether or not life insurance is actually needed.
When you come right down to it, it s a matter of money -- if death would cause a financial burden for the family, then life insurance is critical. Financial matters to ..
About the author:
Dan Johnson enjoys writing about term life insurance. Visit http://www.tlilowdown.com/to learn more.
Dan JohnsonTerm Life Insurance: The differences between Term and Whole Life policies
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