Whole vs. term life insurance: What's the difference? – CBS News

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By matt richardson
/ CBS News
Life insurance, just like all other types of insurance, provides protection and security for when things go wrong. In the case of life insurance, that would be the death of the policyholder. By ensuring that a policy is in place, the insured has helped ease any potential financial burdens (at least, for a certain period of time) by providing financial support in the form of a life insurance payout.
How much life insurance someone should have is subjective, however, and can be dependent on a variety of personal factors. The type of life insurance policy chosen is also specific to one’s personal circumstances and preferences. There is no single recommended type for everyone. That’s why it’s helpful to understand the difference between the two most well-known life insurance types: whole and term.
If you’re currently in the market for life insurance, or simply want to increase the coverage you already have, now is a good time to do so. You can start by getting a quote today.
Before deciding the kind of insurance policy you want, make sure you understand how both primary types work.
There is no one-size-fits-all answer when it comes to life insurance. You may already even have a life insurance type chosen for you by a spouse, family member or employer. But understanding the differences between whole and term can assist you in making the right decision.
Whole life insurance tends to be more expensive because you have more options. Also commonly known as permanent life insurance, this type remains active for the full life duration of the insured. There is no policy expiration date. Consequently, premiums are relatively high.
But there’s another factor to consider with whole life insurance: the cash and investment aspect. Some whole life insurance policies pay a dividend. You can also build up the dollar value of the policy and cash it out to use for other expenses, debt and beyond. This type of life insurance should also be viewed as an investment – as the extra cash the insurance company has received from the premiums is invested for you. 
In short, whole life insurance is pricier but the benefits may be worth it. If you’re interested in exploring your life insurance policies there are multiple companies waiting to assist you. Get a price estimate and pick the policy type that’s best for you and your family.
This type of coverage is self-explanatory. It’s limited to a select term or time frame of your life. It won’t last for the policyholder’s whole life span and it will need to be renewed. Terms can be 15, 20, 30 years or some other agreed-upon time frame. If the policyholder dies during one of these terms then the policy is paid out to the beneficiaries. If they don’t, and the policy isn’t upped for another term, then no payout will be issued.
Because of the time constraints and the fact that payments are not invested nor accrue a cash-out value, premiums for term life insurance are generally cheaper than whole life insurance. But each time you renew, expect premiums to rise. This is doubly true if you get sick or experience a high-risk medical condition during one of your terms. 
Ultimately, both types of life insurance offer your loved ones some financial protection if you die. When you purchase life insurance, you can list one or multiple beneficiaries and determine how you want to distribute the proceeds. While whole life insurance seemingly offers the better path, it doesn’t necessarily mean it’s the better option for the policyholder. 
To sum it up, here are some key differences between the two policies:
Regardless of where you fall in this range and what your personal preferences and circumstances are, most financial experts agree it’s smart to have life insurance. Whether it’s term or whole isn’t as important as just having the protection in place.
Remember, policies can always be adjusted and preferences change (especially as the insured ages) but coverage and protection for you and your family remain vital.
Still not sure which life insurance type is right for you? Get a quote and explore your options today.
First published on August 23, 2022 / 3:21 PM
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