A Life Insurance Comparison: Whole Life Insurance Versus Term Life Insurance

by Daniel Theron

What type of life insurance might fulfill your assurance needs? This article is a life insurance comparison about whole life insurance versus term life insurance.

The difference between whole life insurance and term life insurance.

Whole lifetime assurance consists of an insurance plus an investment section that stays in force until the contract is cancelled or the insured person dies.

Term living assurance covers the policyholder only for the predetermined length of the policy, e.g. 10 years. It offers no investment option.

A whole life insurance definition.

Whole lifetime cover presents death protection for the full lifetime of the insured person. It generally consists of basically two parts. The mortality charge is the primary part of the premium and it pays for the insurance coverage. The subsequent part of the premium contributes to the investment that earns interest. After the policy holder dies, the face value of the policy is paid out to the beneficiaries.

The advantages of whole life insurance.

* You can use it in your estate planning.
* A part of the life insurance premiums are invested and builds up a cash value.
* A whole life insurance policy may earn dividends.
* You may borrow money against the policy’s cash surrender value.

The disadvantages of whole life insurance?

* Insurance salespeople may tend to promote these policies because it pays a larger commission.
* Most people do not have life insurance after the age of 65.
* Whole premiums are far more costly than term life insurance premiums.
* The rate of return on a whole life insurance investment is smaller when compared to other investment opportunities.
* Policyholders cannot participate in the investment management process.
* It could take up to 10 years for a permanent lifetime policy to gain a significant cash surrender value.

A term life insurance definition.

Term lifetime assurance stays in effect for a limited period. The policy will end and the beneficiaries will receive nothing if the insured person outlives the duration of the policy. The beneficiaries will receive the death benefit if the insured person passes away within the limited period.

The advantages of term life insurance.

* Term may be used to provide cover for short-term needs.
* Term is generally cheaper than permanent lifetime assurance.
* Term may be easier to understand.

The disadvantages of term life assurance.

* It may prove to be inappropriate for long-standing needs.
* It provides only death protection.

Whole versus term life insurance premiums.

Whole lifetime assurance premiums are more costly than term premiums. The initial yearly premium is more often than not much higher for a whole life plan than for a term life plan. Term cover premiums increase as time goes by, while the premiums for whole cover stay the same for length of the policy.

When you can consider buying term life insurance.

* When you only require coverage for a particular period of time.
* When you cannot afford the cost of whole lifetime assurance.
* It may also be utilized on top of whole assurance.

When you can consider buying whole life insurance.

* You may consider buying it if you can manage to pay for the initially expensive premiums.
* When you are prepared to maintain the policy for the remainder of your life.

I can wrap up this life insurance comparison by saying that the subject of whole life insurance versus term life insurance will continue to be debated for years to come.

About the Author
Copyright 2008 - Daniel Theron. You can visit wholelifeinsuranceversustermlifeinsurance.com for more insurance related information.