Whole Life Insurance vs. Term Life Insurance: A Quickie

Copyright (c) 2012 Joe Maldonado

Life insurance companies provide two broad types of life insurance covers to people. They are the term life and the whole life. However, there are many sub heads under both the categories. People often get confused between these two forms of insurance and make incorrect decisions. It is because of this reason; it is essential to get a clear differentiation between whole life vs. term life so that people can actually understand the difference between the two and find out the most relevant type of insurance that they need.

Term life and whole life insurance are two different types of life insurance coverage available. Though they are different on a number of aspects, there is still some similarity between the two. However, there are not many similarities. There is only one aspect where these two are similar and that is none other than the death benefit. This means that in case of the unfortunate death of the person insured, the beneficiaries of the person insured (also known as the policyholder) will be entitled for the sum assured. This means that the beneficiaries will receive the lump sum amount of money on the event of death of the policyholder. Apart from this, there are no other similarities. There are differences which set these two forms of insurance apart. Let us take a look at the similarities and differences in further details. However, you need to remember one thing. This guide is not a complete guide and if you have any queries, please ask for assistance from your financial advisor.

Explaining The Similarity

Whole life insurance is similar to the term life insurance in t he sense that both of them provide death benefit. In case the policy holder dies, the beneficiaries will get the lump sum amount of money which is known as the sum assured. The insurer will process the claim made by the beneficiaries and investigate into the case to ensure that the life insured actually died naturally and that it is not a set up. This is done to avoid fraud and the insurers will never take any chance because the money they will pay is actually from the pool of money accumulated from the premiums paid by many people. If the insurers find that everything is correct and in place as per the policy agreement, the insurer will pay the beneficiary as per the terms of the policy. Once the money is provided to the beneficiaries the insurer will not be responsible for the same any more. The beneficiaries will be free to use the money as per their discretion.

Explaining The Differences

The main aspect which differentiates the two forms of insurance is that of survival benefit. The whole life insurance gives survival benefits. This means that if the life insured survives till the policy period ends, the insurer will provide the sum assured to the life insured either in form of maturity benefits or in form of pension when the person retires. This is not available with the term insurance policy. Term life insurance will only have death benefit as mentioned before.

Since the whole life insurance has the additional survival benefit, the policy holder is required to pay higher premiums. This means that whole life insurance is actually pricey compared to term life.

The term insurance is the oldest form of life insurance which is available. Term life insurance is over 100 years old. The whole life insurance is actually very new compared to term insurance.


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