What Are the Differences Between Term Life Insurance and Whole Life Insurance?
August 16, 2008
There are two main types of life insurance that make up most if not all of the policies that you can acquire. These two types of insurance are whole or universal life insurance, and term life insurance. These two types of insurance are both quite different in nature, not only in how they behave but also what they cost and how long they last.
What is Term Life Insurance?
Term insurance that only lasts for a pre-specified amount of time. Some policies last ten years, twenty years or thirty years in length but they rarely if ever last longer than this. Because these term life insurance policies only last for a small amount of time rather than for the entire length of your life, their rates are typically more affordable than other types of insurance products.
This is not only because term life insurance policies last only for a specified period of time, but also because they are less risky to the provider than traditional whole life policies. What makes these policies less risky for insurance providers is that if the insured does not pass away during the term, there is absolutely no payout for the insurance policy. While there are some policies that pay back the collected insurance premiums at the end of the term period, most simply pay nothing out at all.
How Does This Differ From Whole Life Insurance?
Whole life, also known as universal life insurance, has a much different set of characteristics. For example, the policies begin as soon as you are approved, and continue until you pass away. Because there is a guaranteed payout in this case, these insurance policies are much riskier for insurance providers, guaranteeing that they will eventually have to pay out money.
Whole life insurance tends to have much higher rates, because of this guaranteed payout. Most insured people do not mind paying the additional premiums if it means a guaranteed payout to their beneficiaries upon their death. This is what sets whole insurance apart from term life insurance
Which Option is Right for You?
When it comes to choosing between term life insurance and whole insurance, it should not be difficult for you to determine what your needs are. Choosing the right type of insurance has to do with adequately assessing your own needs and situation, and then acting accordingly. Acting accordingly essentially has to do with determining whether a short term insurance policy would be ideal for you, or whether a long-term option would be better.
If you are young and preparing ahead of time, then a whole life policy would be ideal. If you are an older adult with children and a family to protect, a term life insurance policy with more protection for lower rates may be ideal.
If you are not sure what type of insurance to pursue, you may want to speak with a qualified insurance provider to get their advice on your particular situation.
Sharon Taylor writes articles on life insurance related topics for eQUOTE Life Insurance, a premier Internet resource for term life insurance rates, quotes and useful life insurance resource information.
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