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Whole Life Insurance vs Term Life Insurance

Updated on October 26, 2012

Taking a life insurance policy may be seen as another expense or financial burden that we should avoid. However, if you seriously think about it, you will discover that insurance has benefits which can work for you and/or your family depending on the situation. Although this will mean making payments for premiums which will in turn reduce your disposable income, taking either a whole life or term insurance policy will reward you in the long term if moves you from where you are to where you will be in the future. 

So what do I mean by this? Let me start by saying that neither whole life nor term life insurance is necessarily the better option for any particular individual. What is whole life insurance and what does term life insurance mean? Whole life insurance refers to coverage that provides, as the name implies, insurance for a person's entire life. It is designed to meet permanent needs, such as: providing future financial needs, final burial expenses, etc. One of the wonderful benefits of this type of insurance is that it has a cash value that grows and which can be used to obtain loans. 

Term life insurance on the other hand, as its name implies, is insurance coverage that runs only for a specified period of time. Unlike whole life, it does not have a cash value, but will pay beneficiaries a death benefit as designated by the insured. Consequently, this type of insurance cannot be borrowed against prior to death and you can’t "cash in" on this type of policy. Most often, the term life insurance is purchased to achieve a specific purpose, such as: protect your family from incurring debt from a particular business deal, et al. 

Although features of these two types of insurance have been mentioned already, there are additional features, which include: for whole life insurance; policy is dependent on promptly paid premiums and is often more expensive since it covers the whole life without increase in premium. While for term life insurance, this includes: possibility of an increase in premium paid if one wants to continue insurance after expiration of term as a result of illness or old age. Plus, policy is also dependent on prompt payment of premium.

So far so good, however you may still be wondering which one is best; whole life or term life? That choice is really up to you because you need to consider how the benefits of each policy suit your unique situation. You do this by considering what you now know about the policies and by assessing your life insurance needs by making use of tools such as MSN Money's Life Insurance Needs Estimator. Then you should speak with a qualified life insurance professional for further advice.        


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    Aussie Insurance 

    7 years ago

    Great article. The best point that you make here is the point that there is no "right" answer when it comes to deciding between whole and term life insurance. The answer depends on a number of variables that are unique to the individual. That is why it's so important to take the time to compare life insurance options and educate yourself about the different choices available so that you can select the plan that is right for you.


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