Compare term vs. whole life insurance – which is better?

It is difficult to say which type of life insurance is better as both term and whole life insurance have their advantages and disadvantages. However, knowing their characteristics can help you find out which policy type is the right one for you, and whether it matches your specific financial needs and objectives.

Why Choose a Term Life Insurance Policy

• The major asset of term life insurance is its affordability. Term life premiums are the lowest on the market when the applicant is young and healthy. However, premium rates rise as policyholders age, often making it impossible for policy owners to renew their coverage because of the high costs.
• Term life insurance is also more easily accessible than whole life insurance. You can find hundreds of instant term life quotes online, and compare them within seconds, absolutely for free. Whole life policies are more complex, often requiring the mediation of an agent, which can considerably raise the cost of the policy.
• Term life insurance is the best option for people who need coverage for a limited period of time (usually no longer than 20 years). It is assumed that once you have paid off your mortgage and raised your children, your expenses, and hence your need for insurance is likely to decrease.
• One of the best characteristics of term life insurance is its convertibility. It allows you to convert to permanent life insurance at any time, without a medical exam. Term life policies can also be renewed once they expire.

Why Opt for Whole Life Insurance

• Whole life insurance might seem expensive but in the long run, it usually proves cheaper than a term life policy. This is so because, once determined, whole life premiums are fixed and are not subject to change. Even if your health deteriorates, even if you reach an advanced age, you are secure against the increase of the premiums.
• Under whole life insurance, the insurance company takes all the risks, and the policyholder takes none.
• Compared to term life insurance which only pays proceeds if the insured dies within the policy term, whole life policy owners can receive benefits while they are alive. If they choose a participating policy, they are entitled to dividends from the insurer. Also, a small portion of the premiums goes into the cash value and a substantial sum can build up over the years, which can then be invested. A whole life policy has a guaranteed annual rate of return of between 3 and 4 percent.
• Whole life insurance is the best alternative for people with permanent needs since it guarantees lifetime protection.

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