Term vs. Whole Life Insurance

It’s hard to find any information on Term vs. Whole Life Insurance that’s been easily explained, so we hope that this information can be useful for common rates, quotes, ratings, so get your calculator.

Experts suggest that the right type of life insurance to get is called term. The differences between the most common types of insurance can be confusing. Let’s try to decipher some of the lingo.

The basic difference between term and whole life insurance is this: A term policy is life coverage only. On the death of the insured, it pays the face amount of the policy to the named beneficiary. You can buy term for periods of one year to 30 years.

Whole life insurance, on the other hand, combines a term policy with an investment component. The investment could be in bonds and money-market instruments or stocks. The policy builds cash value that you can borrow against.

The three most common types of whole life insurance are traditional policies, universal and variable. With both whole life and term, you can lock in the same monthly payment over the life of the policy.

Keep in mind that whole life insurance is expensive because you’re paying for the investment portion.That extra cost might almost be worth it if these policies were a good investment vehicle. But, usually they aren’t.

Insurance agents like to call these policies retirement plans, emphasizing the “forced savings” inherent in forking over the premiums each month “for retirement.”