What Is The Difference Between Term Insurance And Whole Life Insurance?
Term life insurance and whole life insurance are two of the most common types of life insurance policies. While term insurance provides basic coverage for a certain period of time, whole life insurance is a form of permanent life insurance that comes with a cash value account. Let’s break down the key differences between these two types of policies:
| Term Insurance | Whole Life Insurance |
|---|---|
| Provides basic coverage for a certain period of time | Offers lifetime coverage |
| Does not accrue any cash value | Includes a cash value account that grows tax-free over time |
| Lower costs compared to whole life insurance | More expensive than term insurance |
| Suitable for those seeking basic protection for their family | Suitable for those seeking a flexible financial tool with living benefits |
Term life insurance is straightforward insurance without a savings or investment component. It is suitable for those seeking basic protection for their family and is cheaper compared to whole life insurance. On the other hand, whole life insurance is a form of permanent life insurance that offers lifetime coverage and comes with a cash value account that grows tax-free over time. It offers several living benefits deriving from its cash value accumulation, which can be borrowed against or withdrawn during your lifetime. However, it is more expensive compared to term insurance.
When choosing between the two, it is important to consider your needs and wants. If you only need life insurance for a relatively short period of time, term life may be better. If you need permanent coverage that lasts your entire life and offers living benefits, whole life insurance is likely preferred. Regardless of insurance policy type, premiums will be lower the younger and healthier you are when you buy it.
