Term Insurance vs. Whole Life

by Lysandra Lee

Overview

Before purchasing life insurance, it is best that you research your options and choose the plan that is best for you. The main types of coverage are whole life and term. Important aspects may be coverage period, benefits over time, and premiums required.
Cost

With a reduced risk of the company paying a claim, term insurance is less costly than whole life. A whole life policy has a premium that is set until your death, while a term policy only has guaranteed premiums for the actual length of the policy.

Time Frame

Once approved for a whole life policy, you are guaranteed coverage until death unless you lapse on paying premiums. Term policies are only guaranteed for one to 30 years in five-year increments.
Underwriting

To qualify for insurance, the life insurance company will review your medical history. With whole life, you are only required to do this once. Since you must be reviewed with each re-application for term coverage, you risk being declined due to new health issues.
Values

Whole life coverage pays the death benefit and funds investments that build cash value. This additional money can be withdrawn before death or recalculated to lower premium rates. Term insurance is considered "pure insurance," building no additional cash value.
Considerations

A few companies that you may wish to research are Conseco, AIG, or State Farm. It is always best to meet with a licensed insurance agent to discuss all life insurance options that are available to you.