Life insurance is one of those reluctant necessities. No one really likes to think about it because it makes you confront your mortality, but you have to think about it to protect your family. The two main life insurance types are term life and whole life. Both provide coverage so your family will not be thrown into a financial whirlwind should you pass away, but their range of benefits strike a sharp contrast from one another.
Time Frame
Whole life insurance provides coverage for your entire life so long as you continue to pay the premiums. Term life has a set expiration date, whether you've died or not. Term life insurance can be bought for periods of five, 10, 20 and 30 years, and provides coverage to your family for that set expanse of time.
Cost Difference
Whole life insurance costs more than term life because you don't only pay into the policy, you're also paying into an investment fund. For many, term life is the more affordable way to go, providing you with coverage while you enter into your own investments and cash-building efforts.
Coverage
Term life and whole life insurance policies will pay out the policy amount to your family should you die while the policy is active. But term life policies have a pre-determined end date, so if it expires before you die, you'll likely lose out on your premiums and will no longer be covered. Whole life policies cover you for your entire life, expiring on the date of your death.
Investment
Whole life insurance policies include an investment portion. Your money is split between the policy and an investment fund, which allows you to build interest and cash value while the policy remains active. You can even use this money at a later date to help pay for your child's education, home repairs or emergencies. Term life doesn't offer an investment option.
Premiums
Term life premiums are very inexpensive because all you're paying for is the policy. Whole life premiums include your standard policy coverage as well as commissions, annual fees, sales charges and investing. This makes the premiums on whole life policies considerably more expensive and more geared toward the investor than just a person looking for simple coverage.
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