Term Life insurance pays a benefit in the event of the death of the insured during a specified term. Generally, people purchase Term insurance when they need a large face value for a limited time period. For example, you might have a large mortgage that would need to be paid or children who are counting on you for college tuition. In either of these cases, the need for large sums of life insurance would most likely be temporary. The term policy will not gain cash value, and you cannot borrow against it, however at the end of the agreed upon term, you will usually have the opportunity to convert part or all of the policy to permanent insurance or to renew it for a shorter term, and at a higher price.
Whole life insurance pays a benefit on the death of the insured and also accumulates a cash value. This type of insurance is designed to stay in force until death. As long as you purchase a policy with a “level” premium and level face value, neither the premium nor the benefit will ever change. You will pay the same premium from the day you make the purchase until the day the policy matures (usually 120 years of age)—or you are deceased. If you live that long, the company will send you a check for the full face value of the policy. Additionally, many companies have “modified” policies which can have premium increases every five years, but do not usually decline in face value. Simply ask for a policy with a level premium, and yours will never change.
Please note that both Term and Whole life insurance policies have optional riders such as disability waivers, spouse riders, or child riders, additional accidental coverage, and others.
Simply put, the main difference between Term and Whole life insurance is that Term is temporary, generally lasting 10 to 30 years, while Whole is permanent, which remains in effect until the day you are deceased—or until you are 120 years of age, whichever comes first. Unlike most agents who strongly favor one type or the other, out philosophy is different. Neither product is better or worse than the other. Rather, the type of insurance that is best depends on your particular situation. At the end of the day, both products hold important value and cover different needs. Over our 20 plus years experience in the insurance industry, we’ve found that most families prefer a blend of insurance – or what we call the 80/20 rule, which meets the broadest range of needs. Under this option, 80% of your coverage is Term , which is generally inexpensive (dirt cheap) and offers significant coverage; while 20% is Whole Life, which tends to be more costly but offers added benefits such as Cash Value. We hope that you find this information helpful during your decision making process to protect your family. Should you have questions at any point, please do not hesitate to contact us at customerservice@
