Whole Life Versus Term Life Insurance

Age and health are the two main factors to consider when deciding between getting a whole life versus a term life insurance policy. When you are young, a term life insurance policy may be the way to go as you want to protect your family from having to provide for themselves and pay off mortgages and other debts. Older people may want a whole life insurance policy because the policy will pay out at the time of death and hopefully, they will have paid off their debts and won't leave their loved ones with a mountain of bills to pay. If your term life policy expires at 20 years for example, and you die after the expiration, you will not get a pay out.

Whole Life Insurance
Also referred to as permanent life insurance, this type of policy can be bought at anytime in a person's life. Sometimes parents or grandparents will gift a $500 whole life insurance policy to an infant. When left to build interest, the whole life insurance policy could have a rather nice pay out to the beneficiary at the time of death. You really can't do that with term life insurance.

Whole life insurance also builds cash value over time that can be borrowed against. You cannot borrow against a term life insurance policy because it builds little or no value. The money that you put into a whole life policy is put into a long term savings model that accrues interest thus providing financial backing for a loan. The downside to taking out a loan against a whole life insurance policy is that when you die, the bank gets paid first and then the beneficiary gets the rest.

Term Life Insurance
Most insurance companies won't offer term life insurance policies to those over 65 or 70 years of age because statistics show that the insured will die before the policy expires and the bank after only receiving a few years worth in premiums then has to pay out to the beneficiary. If you are young and healthy you can get insured for a lot of money for a low cost.

Return of Premiums (ROP) is something that is fairly new to the term life insurance seen, but it is making a hit. If you out live the term of your policy, some insurers allow a refund of your policy's cash value (the premiums that you paid over the life of the policy). As an example, if you had a 20 year term life insurance policy and paid $250 each year in premiums, you could get $5000 back at the end of those 20 years.

Both Whole and Term Life Insurance Have Positives and Negatives Whole life insurance can be gotten at any time and it builds value that can be borrowed against, but it usually comes with a higher premium. Term life insurance is usually not given to the elderly and it is limited by time, but it has inexpensive premiums for the amount of coverage that it offers. Both policies are an integral part of having peace of mind when it comes to protecting our loved ones.