What is the difference? Term or Whole Life

Reasons to buy Whole Life

Whole life policies remain in force until death (when the policy pays the beneficiary its face value). Whole life policies also have a savings component that accumulates value, tax deferred, against which the policy holder can borrow. (both types of policies require that premiums are paid current to remain in force). Statistically, only about 2% of term policies ever pay a benefit to the beneficiary. the rest just expire.

Reasons to buy Term Life

Term life policies remain in force for the stated term, then terminate. They do not accumulate cash value but the premiums are much lower. You can buy much more insurance coverage per dollar spent than with a whole life policy. Term policies may be renewable, but at much higher premiums. If health has deteriorated, term policies may not be renewable. Term policies are most appropriate when there is a temporary need for coverage that will terminate at a anticipated date in the future, for example, when the mortgage is paid off or when the kids graduate from college or move out.

Both types of policies have many options, riders and policy provisions. You need to fully compare and analyze your reasons for purchasing insurance, and then work with your agent to determine just what type of policy and the specific options or riders that best meet your needs at the time. Needs may change in the future and your agent can help you navigate your changing needs and make the appropriate changes to your coverages. Proceeds from most life insurance is paid to the beneficiary tax free.