When it comes to life insurance, there are two main types of policy to choose from – term life insurance and whole life insurance. As the name suggests, term life insurance provides cover for a set period of time, whereas whole life insurance covers you for your entire life.
So, which one is right for you?
Well, that depends on a number of factors, including your age, health, lifestyle and financial circumstances. Here, we take a look at the key differences between the two types of policy to help you make the right decision.
Cost
Generally speaking, term life insurance is cheaper than whole life insurance. This is because it only covers you for a set period of time, so the insurer doesn’t have to pay out a death benefit if you live to a ripe old age.
Cover
Term life insurance only provides cover for a set period of time, which is usually between 5 and 30 years. If you die during this period, your beneficiaries will receive a payout. If you don’t, then there is no payout and the policy simply expires.
Whole life insurance, on the other hand, covers you for your entire life. This means that your beneficiaries are guaranteed to receive a payout, no matter when you die.
Flexibility
Term life insurance is generally more flexible than whole life insurance. This is because you can choose the level of cover you need and the length of the policy to suit your circumstances. For example, you might take out a 20-year term life insurance policy to cover the mortgage on your home.
Whole life insurance is less flexible as it covers you for your entire life. This means that you’ll be paying premiums even if your circumstances change and you no longer need the cover.
Investment
With whole life insurance, a portion of your premiums is invested, which can grow over time. This cash value can be accessed through loans or withdrawals, subject to conditions.
Term life insurance doesn’t have an investment element, so you won’t be able to access the cash value.
So, there you have it – a brief overview of the key differences between term life insurance and whole life insurance. As you can see, there are pros and cons to both types of policy, so it’s important to consider your individual circumstances before making a decision.
