Whole life insurance policies are designed to offer protection during the entire lifetime of an insured, whereas term life insurance policies are designed to offer coverage for a specific period of time. The main difference between the two is that the premiums for whole life plans will remain level throughout the duration of the policy, whereas premiums for term life insurance may increase as one ages.
Whole Life Insurance
Whole life insurance is protection against financial loss resulting from death or terminal illness . It provides lifelong protection at levels determined when the plan was first purchased. >The premium charged by most companies for this type of policy does not change until your contract expires or you experience some sort of qualifying event (such as reduction in paid-up benefit). Once that occurs, the premium must be re-determined.
Term Life Insurance
Term life insurance is protection against financial loss resulting from death or terminal illness for a specific period of time, regardless of age . >As built into the plan's name, term insurance coverage lasts until your contract expires or you experience a qualifying event (such as reduction in paid-up benefit). Once that occurs, the policy ends. Term life insurance is pure life insurance and does not accumulate cash value. However, term policies are typically less expensive than whole life policies because the company needs to make only one commitment -- to keep your premiums stable until you reach age 100 if you live that long without incurring any health problems along the way. When you compare term life insurance rates, you'll find that a 40-year old man may pay less than a 25-year old man for the same amount of coverage. Term plans can be tailored to meet your needs with varying time periods and levels of protection.
Whole Life Insurance Benefits:
· A whole life policy accumulates cash value over time, typically earning roughly 5% per year on average. Cash values can be withdrawn or borrowed against at any time, subject to policy loan limitations .
· Provides continuing protection regardless of health changes for as long as you continue to pay premiums. Once the initial premiums have been paid, it allows for more flexibility in premium payments if needed due to a change of financial situation.
· Generally has lower premiums than term life insurance for the same amount of coverage (e.g., $1 million).
Term Life Insurance Benefits:
· Provides fixed term, guaranteed level term or annual renewable term protection in 10, 15, 20 or 30-year increments up to age 121 . >For example , if you're looking for a minimum of 10 years' worth of coverage and would like to lock in your rates for the entire time, you might want to consider a 10-year term policy . It also protects against inflation since it's cheaper than whole life. >If you'd rather pay more over time so that when your contract expires there is no need to re-qualify, you might prefer a 20- or 30-year term plan.
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