The concept of getting insurance is becoming more common and necessary as more and more people opt for life insurance plans. Yet, many people are faced with the trouble of choosing the best insurance plan. Whole and Term Life Insurance – what is the difference? A little knowledge about this will go a long way in helping you decide which one to sign up for.
There are several types of insurance – life insurance, health, auto insurance, homeowners, etc.
Life Insurance Programs Are Of Two Main Types:
- Whole life insurance and
- Term life insurance
What Is Term Life Insurance?
Term life insurance refers to an insurance policy where the insured pays a sum of money to the insurer or to an insurance company for an agreed period of time. The time frame is agreed upon by the insurer and the insured after which an amount is paid to the insured.
Whole life insurance on the other hand is a program where the insured pays the insurer a fixed amount throughout their working life. The amount accrued is then paid to the family or relatives of the insured upon their demise.
Both packages are great and the benefits you hope to get will determine which of the programs to opt for. Before then, let’s discuss each policy in detail.
Features Of Term Life Insurance
It Is Comparatively Affordable
Term life insurance amounts are often very affordable and therefore suitable for anyone looking for low-budget insurance to start with.
The Buying Process Is Easy
Payments for term life insurance can be made either online or offline. The insured will make payments using the most comfortable medium. A lot of people prefer making payments online due to the ease and the insurers sometimes give discounts as this is also a more convenient method for them.
Several Payout Options To Pick From
The insured decides how the amounts are paid at the end of the term. It can be paid as a lump sum or split and paid on a monthly or yearly basis whichever is desired.
It Can Be Renewed Upon Expiration
Term life insurance packages last only for a given period of time. If the insured chooses to continue after the period elapsed, they can always opt for renewal.
Term Life Insurance Can Be Changed To Whole Life Insurance
If you start out your insurance journey with a short-term insurance plan, you can always switch to a whole life insurance plan. Most insurers have specific guidelines that can be followed for these processes.
Payment Plans Are Available To Ease Payment
The amounts can be paid monthly or quarterly or annually depending on what soothes you best. An agreement on payment time will be reached between the insurer and the insured.
Features Of Whole Life Insurance
It Offers Lifetime Coverage
The whole life insurance program lasts for your whole life. You will be required to pay the amounts at designated times for life.
Returns On Payment
The amounts paid build up as you will be getting returns on your money at appropriate times.
Room For Loan Application
For this insurance program, you can apply for loans from the amount contributed. However, the loans will build in interest over time and failure to pay off will result in a decrease in the amount of death benefit.
You never have to worry about changes in the amount to be paid as it remains constant throughout the program.
Having discussed the features of both whole and term life insurance, let’s quickly look at the differences.
Differences Between Whole And Term Life Insurance
Length of Time
The term life insurance is a temporary insurance policy therefore it will cancel upon expiration while the whole life insurance policy does not expire as long as the agreed amounts are paid at the set times.
The term life insurance serves as a backup in situations of job loss. For people who have dependents and lots of bills to pay. The term life insurance is most suitable since the whole life insurance only covers costs and expenses after the demise of the insured.
To start the term life insurance, very little amount is required whereas the whole life insurance is pricier. Although the term life insurance amount increases after each renewal, the amounts for whole life insurance is stable all through.
Returns on payment
For whole life insurance, you will be getting returns on a payment that builds up over time but there are no returns on payment for the term life insurance.
Access to funds
It is easier to access funds in term life insurance as this is what the policy caters to life emergencies. The whole life insurance on the other hand is locked away but the insured is allowed to apply for loans when needed.
How To Decide On An Insurance Plan
The insurance plan you should go for is the one that will be best for you. If you are planning on leaving some money for your children or dependents, whole life insurance is a better choice. Also, the amount you have to start the plan should be considered as the term life insurance is often more affordable and can be later converted to whole life insurance.
Which Life Insurance Is Best?
To some people, whole life insurance seems like a bad idea, but to some, it’s just perfect. So there is no best when it comes to insurance packages. Instead, go for the one that suits you the most considering your budget and the policies involved.