Term Life vs Whole Life Insurance: Difference and Comparison

Whole life insurance and Term Life insurance are very different products that serve different purposes. Whole life insurance is full life insurance that has lifelong benefits.

Temporary life insurance guarantees for a certain period of time. It is not eligible for company dividends.

Key Takeaways

  1. Term life insurance provides coverage for a specific term or duration, between 1 and 30 years, while whole life insurance covers the insured’s entire life.
  2. Term life insurance has lower premiums than whole life insurance, making it more affordable, but it does not accumulate cash value like whole life insurance.
  3. Whole life insurance offers cash value accumulation, which can be borrowed against or withdrawn by the policyholder, while term life insurance does not offer this feature.

Term Life Insurance vs Whole Life Insurance

Term life insurance provides coverage for a specified period of time, with lower premiums than whole-life insurance. Whole life insurance provides coverage for the lifetime of the policyholder, with a cash value component that grows over time and can be used to pay premiums or withdrawn or borrowed against by the policyholder.

Term Life Insurance vs Whole Life Insurance

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Term life insurance or term policy is one kind of insurance that covers you for some time, 10 or 20 years.

That means if you pass away during that time frame, your beneficiaries will be paid a certain amount depending on what kind of policy you purchased.

Whole life insurance is used for estate planning. It has also been used for income-tax planning and retirement security.

Whole-life policies can be used to help families get out of debt, pay off their mortgage early, save for college, and so much more. It works best as a long-term investment strategy.

Comparison Table

Parameters of ComparisonTerm Life InsuranceWhole Life Insurance
Full protectionNoYes
Increase in premiumYesConstant
Estate PlanningNoYes
Company dividendsNot eligibleEligible
Lifelong coverageSpecific periodLifelong

What is Term Life Insurance?

Life insurance can be very helpful in providing financial assistance to your loved ones when they need it most. This type of policy covers your funeral expenses, outstanding debts, and mortgage payments in case something happens.

The main purpose of life insurance is to help your family in the event of that person dying.

A life insurance policy ensures the payment of a lump sum death in the life of an insured person by an insurance company immediately.

The amount to be paid by the insurer is specified in advance, as a lump sum. This type of life insurance provides protection for a fixed period depending upon the type of insurance.

Long-term health insurance is the most important life insurance policy. Life insurance is a very inexpensive way to protect your family’s future when the leading person dies suddenly.

Term policies are the most basic form available on the market today. They are simple contracts that do not.

Life insurance is a necessary part of life. It ensures the life of the income person. Term life insurance is not an expensive option.

It’s also one of the best investments you can make, as it provides an enormous amount of financial protection for your family at an affordable price.

What is Whole Life Insurance?

Complete life insurance is the best way for people with financial experience to protect their families from an unexpected human tragedy.

People who are serious about protecting their family’s future should seriously consider whole-life insurance coverage. This gives you long-term financial security beyond just the policy’s death benefit.

It is a form of permanent life insurance that offers pure financial security and benefits over time, allowing you to invest and get it when you die or at another event that creates a claim.

As with any major purchase, there are things you need to know before deciding.

Life insurance is a lifelong insurance policy that helps with long-term care through financial planning. In your life, the insurance company invests the premiums and any additional funds you add to your account.

The policyholder receives incremental tax benefits from those investments and may be able to borrow from his or her account.

A lot of people don’t know what whole life insurance is exactly because it sounds complicated. Whole life insurance is not as difficult as people make it sound.

Whole life insurance is designed to protect the policy owner’s dependents for their lifetime. The whole life insurance is sometimes known as ordinary life insurance.

Main Differences Between Term Life Insurance and Whole Life Insurance

  1. Term Life insurance has a lower premium compared to whole life insurance.
  2. The permanent acquisition does not apply to temporary life insurance but applies to life insurance.
  3. The premium has the opportunity to go up for term life insurance, but it remains the same for life insurance.
  4. Company shares are not for term life insurance but are for whole life insurance.
  5. Term life insurance is not used for estate planning, but life insurance is used for estate planning.
  6. Term life insurance is not for lifelong coverage, but whole life insurance is for lifelong coverage.
Difference Between Term Life Insurance and Whole Life Insurance
  1. https://www.jstor.org/stable/252615
  2. https://www.nber.org/papers/w9925

Last Updated : 13 July, 2023

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