What is term life insurance?
Term life insurance provides coverage for a fixed period, such as 10, 20, or 30 years. If the insured person dies during that term and the policy is active, the insurer generally pays the death benefit to the named beneficiaries. Term insurance is often less expensive than permanent life insurance for the same death benefit, especially when the policyholder is younger and healthy. It is commonly used to cover temporary financial obligations such as a mortgage, income replacement, or the years until children become financially independent.What is whole life insurance?
Whole life insurance is a form of permanent life insurance. It is intended to remain in force for life as long as required premiums are paid and policy conditions are met. It also includes a cash value component that can grow over time under the terms of the policy. Whole life premiums are usually higher than term life premiums because the coverage is designed to last permanently and includes cash value features.Key differences
- Coverage length: Term life lasts for a stated period; whole life is designed for lifetime coverage.
- Cost: Term life is generally cheaper at the beginning.
- Cash value: Standard term policies usually do not build cash value; whole life policies generally do.
- Complexity: Term insurance is usually simpler to compare.
