Term Life vs Whole Life: Which is Right for You? Learn the Key Differences in One Article!

Although whole life insurance is more complicated than term life insurance, it works more simply than other types of permanent life insurance. Premiums remain constant, cash values ​​grow at a fixed rate, and the death benefit is guaranteed. But be aware that if you borrow from the cash value or withdraw funds and don’t return them, the insurance company will deduct this amount from the final amount paid to the beneficiary.

Many whole life policies are “participating” policies, which means that if the insurance company does well, you may receive dividends. These dividends can be used to increase the cash value of the policy.

The main differences between term life insurance and whole life insurance

Policy Period

Term life insurance: You can choose a coverage period of 1, 5, 10, 15, 20, 25 or 30 years.

Whole life insurance: Coverage lasts a lifetime and usually expires at a certain age, such as 95 or 100.

Cash Value

Term life insurance: No cash value.

Whole life insurance: Cash value grows at a fixed rate set by the insurance company.

Premium

Term life insurance: Premiums generally remain the same throughout the term.

Whole life insurance: The premium is also fixed.

dividend

Term life insurance: No dividends.

Whole life insurance: If it is a participating policy, there may be dividends.

Death compensation

Term life insurance: The death benefit is usually fixed, but there are also declining options.

Whole life insurance: The death benefit is usually fixed, but some policies with tiered benefits are available.