While the policies work in different ways, term life and whole life insurance remain the country’s most popular forms of life insurance. Whole life insurance provides an investment component, growing tax-deferred, and provides the benefits of term life. Term life provides a death benefit upon your death if it occurs within a specific period. Term life is also more affordable and well-suited to a wide range of individuals. Let’s delve a little deeper into comparing whole life and term life insurance.
Whole Life Insurance
Also referred to as permanent life insurance, whole life does not provide a specific coverage term. As the policyholder, it is your responsibility to maintain the policy to keep it in effect. Whether 2 years or 20 years after the initial date, the insurance company will pay out the death benefit to preselected beneficiaries regardless of when the policyholder dies.
Term Life Insurance
This type of life insurance insures the life of the policyholder. As such, you would choose your beneficiaries and your death benefit (i.e., $250k). The length of a term life policy ranges from 15, 20, and 30 years, etc. If the policyholder were to die within the term, the insurance company would pay the death benefit. Otherwise, the death benefit is not paid to beneficiaries.