Term Life vs. Whole Life Insurance
Term Life Insurance
Term Life Insurance provides insurance coverage for a specific term (length of time). Term Life policies are often for 10, 15, or 20 year terms. However 1 year, 5 year, and 30 year term policies are also common. If an insured dies during the term of the policy the insurance company pays the benefit to the beneficiary. If an insured dies after the term has expired then no benefits are paid. For example if someone buys a 10 year term policy and dies 11 years after the policy's effective date, no benefits are paid. Because there is a specific end date to the coverage, term insurance is usually the least expensive type of life insurance coverage.
Term policies can usually be renewed at the end of the term. However the ability to renew depends on the details of the policy. Some term policies are guaranteed renewable. This means the insured can continue the coverage beyond the initial term by paying the renewal premium based on their current age. Other term policies can be renewed subject to completion of a new application and underwriting. While other term policies can be converted to whole life policies. It depends on the specific details of the policy.
Term policies can usually be renewed at the end of the term. However the ability to renew depends on the details of the policy. Some term policies are guaranteed renewable. This means the insured can continue the coverage beyond the initial term by paying the renewal premium based on their current age. Other term policies can be renewed subject to completion of a new application and underwriting. While other term policies can be converted to whole life policies. It depends on the specific details of the policy.
Whole Life Insurance
Whole Life Insurance provides insurance coverage for the entire life of the insured person. As long as the premiums are paid the coverage continues for the insured person's whole life. The premiums remain the same and do not increase. However whole life is usually more expensive than term life because there is no end date to the coverage.
Whole Life can also develop a cash surrender value. This is the amount that the insurance company will pay the policy holder to end the policy early. Cash surrender value increases the longer the policy is in effect but will always be less that the death benefit. (Term Life Insurance does not have cash surrender) value.
Whole Life can also develop a cash surrender value. This is the amount that the insurance company will pay the policy holder to end the policy early. Cash surrender value increases the longer the policy is in effect but will always be less that the death benefit. (Term Life Insurance does not have cash surrender) value.