Term vs. Whole Life Insurance – How Do They Compare?

Term and whole life insurance are, perhaps, two of the oldest forms of life insurance, and are still among the most sought-after types. But, if you’ve never purchased life insurance before, it’s not easy to decide what type of plan to get. And, the more you delve into the details, the more complicated it gets. To make things easier for you, we’ve compared the details and coverage of both term and whole life insurance so you can decide which of these two types of insurance suits your needs better. 

Term Life Insurance

Term life insurance is perhaps the most straightforward of all life insurance plans out there, and that’s because it offers only pure life insurance, without all the bells and whistles. The only reason to purchase term insurance is that the insurance company provides your beneficiary a death benefit if something untimely happens to you.  As the name suggests, this form of life insurance is available for a certain number of years – usually ranging between 5 to 30 years. So, most people purchase it during their employment years. After the term, the policy simply expires. Because a term insurance plan does not accrue any cash value, it’s quite affordable. So, if you want to buy life insurance without spending a lot of money, term insurance is the best bet. 

Whole Life Insurance

Whole life insurance works similar to permanent life insurance. It differs from term insurance in two ways. First, it does not expire as long as you continue paying the due premiums. Second, it accrues a cash value, apart from the death benefit. You can withdraw from this cash value or borrow against it, so it is also a source of funds. Most whole life insurance plans, like term insurance plans, have a level premium, which means you will need to pay the same premium for the duration of the policy term.  Keep in mind that because whole life insurance lasts a lot longer than term insurance and since it has an in-built cash value, it’s usually more expensive than term life insurance. That said, if you have people in your life whom you’ll need to support for an extended period of time, it makes sense to get whole life insurance. 

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