How Much is Whole Life Insurance in Comparison to Term Insurance?

Whole life insurance is a popular option, especially when policyholders find that you can earn a cash value over time. Compared to term life insurance, it is more costly, which is why others may want to opt for it and secure their own investments elsewhere. Below, we’ll outline the costs, helping you decide which option is the best for you and your financial needs.

 

Term Life Vs. Whole Life: Key Differences

Whole life and term life insurance are two life insurance options with completely different benefits. Knowing the differences between them and the different benefits and terms they offer, policyholders can choose the one that suits them best.

 

The Cost

Perhaps the biggest difference between term and whole life insurance is the cost. Whole life insurance is much more costly, often totaling 5 to 10 times more than a term life insurance policy. Term life is considered one of the most affordable policies, perfect for those on a budget.

 

Coverage

Another key difference between the two types of life insurance is the coverage. Whole life lasts for a lifetime, without any need to renew policies. Term life insurance on the other hand lasts only for a term, which could be anywhere from 5 years all the way to 35 or more.

 

Cash Value

One benefit that whole life insurance offers over term life insurance is the cash value. Whole life insurance acts as a long-term investment, with policyholders paying into it and increasing the value over time. Policyholders can access this cash value via a loan, or they can withdraw it, something that isn’t an option with term life insurance.

 

Payouts

Whole life insurance is permanent life insurance that lasts for the duration of the policyholder’s life. Upon their death, the payout of the death benefit goes directly to the beneficiaries. With term life insurance, the death benefit will only payout within the term agreed upon. After the coverage period, there will be no payout to beneficiaries.

 

Cost Comparison

One of the key differences between whole and term life insurance is the cost. As mentioned above, whole life insurance can cost anywhere from 5 to 10 times more, and here’s a look at why.

 

Guarantees

The only guarantee that comes with term life insurance is the death benefit. It’s only paid out if the policyholder dies before the end of the term, so it’s guaranteed but with limits. On the other hand, whole life insurance comes with the guarantee of payout of both the death benefit and the cash value, assuming that policyholders didn’t take a loan or withdraw.

No matter what option policyholders choose, insurers will have to pay out, which is why the cost tends to be higher.

 

Your Age

You might be wondering what your age has to do with the cost difference. The truth is, it has quite a bit to do with it, and here’s why. With term life insurance, it only lasts a term, covering many individuals of all ages. Because whole life insurance lasts the duration of the policyholder’s life, it might have to cover those who cost more.

As we age, the amount we have to pay for insurance coverage is higher. One of the main reasons is because we are more prone to illnesses and approaching the last years of our life. Whole life insurance may need to cover individuals well into their 70s and 80s, which costs more over time.

 

Your Risk

Term life insurance is an option that allows individuals of all ages to secure their finances for themselves and their loved ones. It’s there as protection in case of anything unexpected, which is why it typically covers those that are at lower risk and is, therefore, more economical than whole life insurance.

Those with whole life insurance can be high risk or low, making it costly. Plus, the older one gets, the close they get to their last days, which whole life insurance will have to cover.

 

What Is Whole Life Insurance?

Whole life insurance is a type of permanent life insurance that offers policyholders coverage for a lifetime. It’s not just life insurance but also an investment, accruing a cash value over time. Though the ability to access an investment over time sounds like a great idea, those looking for insurance should weigh their options beforehand, making sure it’s a good idea to secure their financial future.

 

Pros

  • Coverage lasts a lifetime
  • Acts as a long-term savings account

 

Cons

  • Costly
  • Comes with a lot of fine print to understand
  • Penalties for cancellation

 

What Is Term Life Insurance?

With term life insurance, policyholders receive coverage and a guaranteed death benefit, though it’s only for a pre-determined amount of time. Terms can last anywhere from 5 to 10 years, there is a sense of security for loved ones in case the unexpected happens. Term life insurance is usually more cost-effective and simpler to understand.

Pros

  • Simple terms
  • Affordable for all budgets
  • Highly flexible, allowing policyholders to cancel at any time

 

Cons

  • Coverage only lasts a limited amount of time

 

Finding the Life Insurance Policy for You

Anyone that’s looking for life insurance should learn about their options before choosing a policy. There are lots of options out there and choosing the right one can be a challenge. Individuals should not only consider their age, their overall health, and their current financial status. They should also look at their current investments, ensuring that they have their financial future secured.

Even finding out the answers to all of the questions above, individuals could still have difficulty understanding the fine print and choosing their best option. That’s why working with a professional like Sim is recommended, as she can guide you through the process and help you find exactly what you’re looking for.

She not only knows life insurance options but also options to grow and secure wealth, two things that those looking for policies may need.

 

FAQs & Helpful Resources Regarding Whole Life Insurance