Did you know there is a difference between term and whole term life insurance? Over the years, life insurance has remained an effective and efficient medium that creates multiple financial goals for individuals. This process happens mainly through the provision of financial security, financial legacy, and more. On this note, life insurance policies have become an exciting topic.
What Is The Difference Between Term And Whole Life Insurance?
In this blog post, we shall be reviewing the difference between term and whole life insurance policies. We will also discuss how a life insurance policy works and many other related topics.
Overview Of Line Insurance Policies
Do you want to purchase a life insurance policy, and are you wondering which one to buy? Since life insurance has two types (term and whole life insurance policies), you must choose the right one suitable for your needs. No doubt, life insurance can be flexible and rewarding, but deciding either to buy term or whole life insurance is strictly your decision to make. Your conclusion should reflect your financial goals and the financial needs of beneficiaries.
Main Difference Between Term And Whole Life Insurance
Knowing the difference between the two types of life insurance policies will give you an in-depth knowledge of the type of life insurance you should choose. In choosing life insurance coverage, you must put your financial goals and your family’s needs into consideration.
Below are some salient differences between term and whole life insurance policies.
- Length of Coverage
- Cash Benefit
- Death Benefits
- Convertible Insurance Policies
- Cost of Coverage
Length of Coverage
One of the significant differences between term and permanent life insurance is that term life insurance lasts for a given period. The length of coverage makes a considerable difference between both. It has a fixed time duration of 10 to 30 years.
Whereas whole life insurance has no expiring date, it lasts for a lifetime. The companies designed it for long-life financial security. Permanent insurance is more expensive than term life insurance. If you desire to get complete life coverage, be ready to spend more. In other words, term life is less affordable and suitable for anyone who does not have the much-needed funds for the whole life policy.
Cash Benefit
Another difference between term and whole life insurance is the cash value. Term life insurance does not accumulate cash value for you. The reason is that it lacks a savings feature.
Whereas, Whole life insurance policy has a savings component (Cash Value). The more you pay the premium, the higher your cash growth. You can borrow cash or use funds when necessary.
Death Benefits
You enjoy financial security, including funeral expenses, once you get whole life insurance. The company pays death benefits to the insured person’s beneficiary. At the same time, the company limits the term to a specific number of years.
Convertible Insurance Policies
If you consider using a term insurance policy, you have the option to convert it to a whole life insurance policy. Whereas full insurance, as the name implies, is permanent and cannot be altered or changed.
Cost Of Coverage
As stated above, term life coverage is less expensive. It is generally less affordable than whole life insurance. Nevertheless, term life insurance increases as you upgrade or renew. Whereas full life insurance remains the same, it never changes in price.
The above points are some of the significant differences between term and whole life insurance policies.
Questions Regarding Life Insurance Policies
In this section, we shall be looking at various questions regarding life insurance policies. The following are some of the questions and answers we like to analyze.
- How Long Does it take for a Life Insurance Policy to take effect?
- How Does Life Insurance Policy Work?
- What Does a Life Insurance Agent Do?
- Which Life Insurance Policy is Best for You?
How Long Does It Take For A Life Insurance Policy To Take Effect?
The time frame of a life insurance policy depends on the agreement between you and the insurance company. Some life insurance policies take effect immediately after your death. Simultaneously, others will have to wait for a while, usually four to five years, before taking effect.
In simple terms, it takes one or two years before your life insurance takes effect. You can contact your insurance company for detail before you buy, whether term or whole life insurance coverage.
How Does Life Insurance Policy Work?
Life insurance implies a contract between you and the insurance company. The insurance company pays a considerable sum of money known as death benefits to your beneficiaries after your demise. You must ensure you update the premium to qualify for the benefits.
What Does A Life Insurance Agent Do?
The role of a life insurance agent works for insurance companies to provide the following functions.
- They sell life insurance policies to customers
- Life Insurance agents also provide the right advice and information to clients. They further recommend insurance products for both clients and prospects
- They work for both clients and beneficiaries to provide seamless insurance claims
- Life insurance agent offer good customer service and maintain retention policy for clients
- They offer marketing services to both clients and insurance companies.
The above duties are some of the functions life insurance agents do.
Which Life Insurance Policy Is Best For You?
As noted from the beginning of this blog post, the life insurance you choose is solely dependent on you. You are responsible for your decision and personal finance. If your primary focus is an affordable premium, you should go for term life insurance with the lowest monthly premium and convertible once your income increases.
The Bottom Line
However, if you want the very best for the long term and your family’s financial security, the whole life insurance policy should be your best bet even when you are no more. In other words, you can begin with the term and gradually enter into complete life insurance coverage.
