What's the difference between "whole" and "term" life insurance?

Answer 1

In the simplist terms, whole life, also called permanent insurance is used to cover your whole life. Whereas term insurance is the kind of thing you would buy on a temporary basis.

Let's say a husband and wife start paying for a son or daughter's college education. The couple may want additional insurance to cover the extra expenditure, to make sure that if anything happens, the son or daughter's education is covered. This example is what term insurance would be used for. There's an approximate cost, and the term would be four or five years.

The couple then can go out and get a term policy for whatever amount they choose, that will cover the total cost of the education, and set it up that it will only last five years. Once the person graduates, the additional insurance is not needed.

This insurance application could also be used to cover a mortgage, or any other additional expenditure where a hardship would occur if the primary wage earner dies during the period of time the expenditure exists.

Permanent life insurance, or whole life, is a different type of insurance. Typically it will cover someone to age 100. This kind of insurance is something the policy holder keeps for his entire life. And when he dies, the proceeds are usually used for the burial, and to take care of any outstanding debts that person may have owed, and if the person is older when he dies, whatever is left will go towards the spouse's retirement.

Along with this, whole life policies to accrue a certain amount of value. it should not be thought of as an investment, but there are some creative things that can be done with the cash value.

The cash value can be taken out as a loan, but it's a different kind of loan. You don't necessarily have to pay it back. It's best to pay it back, but you pay it when you want to. There are no scheduled monthly payments like a normal loan. The only catch to it, is that if the person dies, and there is a loan out on the policy, the amount owing on the loan will be subtracted from the death benefit.

Something that I do alot with clients is roll the cash value into the policy. This along with dividends, which is money that is put into the policy by the insurance company can be used to cover the cost of permiums.

In this situation, a policy holder may pay on the policy for 5 or 10 years, then never have to pay on it again, and it's paid up insurance for the rest of their life. It's the cash value and dividends that are paying the premiums and not the policy holder.

For the most part, if you want to pay for your burial, take care of your debts, and take care of your family when you die, you purchase whole life.

If you have a temporary expenditure where you know how long you will be paying this expenditure, or the "term" of the expenditure, and the approximate total cost of this expenditure, you would buy term insurance.

Answer 2

With term you're finding out to purchase existence coverage purely. With total existence you're finding out to purchase an coverage plans wrapped in an "investment." The seize is that the investment sucks, that's some distance greater high priced and is loaded with costs and commissions for the revenues agent. as a result brokers consistently desire to sell you total existence yet you're able to desire to on no account purchase it.

Answer 3

whole builds up a cash value that you can use later in life. term is strictly insurance coverage. Term is cheaper and is usually recommended by financial advisors.

Answer 4

Whiole builds value, term is for a specified term. Term is usually cheaper, as when the term ends the company can raise your rate to keep the term, as by then you are older, usually with more health issues.

Answer 5

Whole life is more expensive, but it is more of an investment. Term is less expensive, but paid only upon one's death. You could try this site for more detailed information about insurance. http://insurance.divinfo.com/