What's the difference between term and whole life insurance?
Answered by 4 licensed agents
I'll give you the third grade response. Term insurance is renting the insurance. Nobody dies nobody gets paid. Whole life insurance is generally more expensive has cash value and can accumulate equity in the policy accessible by the insured for loans or cash withdrawals or premium payments etc. In between those two types of products in the product called universal life which is a mid-range cost product with same or similar features as a life policy without the higher cost. Some offer a flexible premium meaning the insured could be the premium amount for owner could vary the premium amount to fit their budget
To keep it simple term lasts for a certain amount of time for example 20 year term for 1 million dollars is $100 a month. None of that changes during the 20 years as long as premiums are paid. It is the greatest value for the dollar. Whole life is permanent so the same million could cost $400 a month but depending on the policy it can be fully paid in a certain time frame and have the ability to purchase additional coverage even if you are not insurable. The solution is different for everyone.
The easiest way to think about it is term is for a limited time. It takes less underwriting than whole life and once the term is done, the monthly rate can change when it renews depending on age, weight and health.
Whole life goes through a longer process for underwriting but will stay with you until age 100 or 120. This policy gains a cash value meaning it can be cashed in for money. The longer it is active the more cash value it has.
