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Term Life Versus Whole Life Insurance: Frequently Asked Questions

Apr 6, 2008
In this article we may once again look at whole life insurance vs term life insurance. We may try to gain some clarity concerning this subject.

Let us first try to define whole and term life insurance.

Whole life insurance may also be called permanent life assurance. It is an insurance that endows the insured person with death protection for her whole lifetime. An insurance payout is rewarded to the beneficiaries stated in the contract when the insured person dies. Whole life policies usually include an investment section that builds up a cash value.

Term life cover has a time limit on the period of coverage. The time limit may be extended by renewing the term policy once it expires. The insured person's beneficiaries will receive no insurance payout if the policy expires before the insured person's death.

Now we may discuss the 2 key types of whole life insurance to be had.

Participating

A participating whole life policy disburses dividends. The dividends normally result from surplus investment earnings and expenditure savings. Dividends may be rewarded in cash, although it is not always guaranteed to be paid out to you.

Non-Participating

A non-participating whole life policy does not pay you any dividends. The premiums remain level during your entire lifetime. The policy's face value is fixed.

There are also 2 key types of term life insurance. Let us quickly examine them.

Increasing term

An increasing term policy's face value increases over the duration of the policy. The premiums remain fixed.

Decreasing term

A decreasing term policy's face value decreases throughout the existence of the policy until it reaches nothing at the policy's conclusion date. The premiums remain unchanged. A decreasing term plan is frequently utilized to cover an expense such as a home mortgage.

Let us now consider the advantages of whole life assurance.

* The life coverage lasts for your whole lifetime.
* The annual premiums are fixed.
* A part of the premiums are invested.

Here are some advantages of term life assurance.

* Term cover may be easier to comprehend.
* Term cover is reasonably priced.
* Term insurance can be used to provide cover for temporary needs.

Next, we should review the disadvantages of whole life assurance.

* Fixed premiums are much more expensive than term premiums.
* There are better investment options available than the investment options offered by whole life policies. You can most likely do better by investing and saving on your own.

Then we may look at some disadvantages of term life assurance.

* Term cover offers only death protection.
* Term insurance can provide cover for temporary needs but is less suitable for long term needs.

Finally, let us conclude this chat about whole life insurance vs term life insurance.

Whole life cover may be less costly in the long run than term life cover in spite of the more expensive initial insurance premiums. Whole life policies may also build up a cash value or earn non-guaranteed dividends. In the end, the long term costs of whole life policy may be less than the overall cost of a term life policy.

Term assurance presents temporary protection with a low initial cost.

In conclusion, both types of life insurance have their own advantages and disadvantages.
About the Author
Copyright 2008 - Daniel Theron. You can visit termlifeversuswholelifeinsurance.com
for more insurance related information.
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