The Difference Between Whole and Term Life Insurance

Choosing between term and whole life insurance

Whole and Term Life Insurance

A good life insurance policy creates securityWhole and term life insurance — what is the difference?  Short and sweet, all life insurance is simply an insurance policy that insures your life or someone else’s life it’s going to pay your loved ones a lump sum of money after your death. You get to choose who the beneficiary is and that will be the person who receives the benefits of the policy,

This is what we specialize in here at Protect With Insurance. Not only do we specialize in finding the perfect life insurance to meet all your needs but we also focus on making sure that every penny you get at the end of your life is tax-free money for your descendants.

When the time comes to pay out on your life insurance policy, we ensure through the life insurance companies we set you up with that that your beneficiaries will not only most certainly be paid and they will not be taxed on what they receive.

That’s what we specialize in providing you with an array of different kinds of life insurance policy choices spanning every available category out there, as their are so many to consider and choose from. Most important, despite the many categories available the insurance policies we find for you will never be taxed when pay out time comes around.

This is very important, especially if you’re looking at $100,000 or $300,000 policy,  a $20,000 policy or even a $5,000 policy. Knowing your heirs are not going to be taxed is significant and comforting. losing a family member is hard enough without the burden of extra taxation on the insurance money.

This is basically what life insurance is all about. Now let’s explore the differences between whole and term life insurance.

 Whole Life Insurance

Whole life insurance guarantees payment of a death benefit to beneficiaries in exchange for level, regularly due premium payments. The policy includes a savings portion, called the “cashwhole life insurance protects you and accrues cash value. value,” alongside the death benefit. In the savings component, interest may accumulate on a tax-deferred basis. Growing cash value is an essential component of whole life insurance.

To build cash value, a policyholder can remit payments more than the scheduled premium. Additionally, dividends can be reinvested into the cash value and earn interest. The cash value offers a living benefit to the policyholder. In essence, it serves as a source of equity.

 So whole life insurance is a full coverage type of life insurance, meaning it covers all deaths except for intentionally self-inflicted, but it’s, covers  and, it’s going to build a cash value over time.

What you pay into your policy is going to build up in value. A lot of people consider whole life insurance similar to a savings account. It builds up a value and you can tap into it if you absolutely need it. Whole life insurance policies generally pay $5,000 to about $40,000 to your loved ones upon your death.

It comes in the form of just a lump sum in one check.

The price and the policy or the coverage amount are fixed for life, which is hugely important. Whatever you set up today as the price and coverage amount, if it’s a $20,000 policy, it would  moist likely cost a hundred dollars a month. The premium is never going to increase and the coverage amount will never decrease. So you’re set as long as you set it up right. It can be the last policy you will ever need. In another 10 years or 20 years, when prices on everything else are much higher due to inflation and you have more income, your price will not be going up.

It’s is going to be fixed. It’s going to be locked in for you, which is a huge benefit.  Whole life policies are deal for leaving financial gifts to your loved ones. They’re ideal for burial and cremation policies because it’s never going to run out as long as you are paying your premiums. You don’t have to worry about your assets being lost at the end of your life.

If you’re getting whole life insurance as a burial policy, you don’t need to worry that if you outlive the term of the policy or that you’re going to have to get reinsured. Whole life policies are ideal for  for paying off miscellaneous bills. Protect With Insurance helps a lot of clients that they incur $10,000 in bills or $20,000 in bills if they get a whole life policy they know that that’s going to be squared away. Here is where the distinction between whole and term life insurance is best noted.

Term Life Insurance

The other element of life insurance is called term life insurance. This type of insurance covers you only for an agreed length of time. It is a full-coverage type of life insurance where you are basically betting you will die before the policy expires in order to collect on the policy.

A term life insurance policy can  be anywhere from one year to 10, 15, 20, 25 or 30 years.

If you’re older, it’s going to be a shorter term because most companies would not let you purchase a 30 year term or even a 20 year term because you most likely would die before you the policy expires and they will have to pay out.

If you’re in your seventies, you’re probably going to be looking at a 10 year term, possibly a 15 year term life insurance policy, if you are approved. If you’re in your fifties, you may have a little bit more options, at the most a 25 to thirty year term life insurance policy.

You may be looking at a 25 to 30 year policy but you would need to be in excellent health.

If you’re in your forties or younger, then you’can most likely qualify for a term life insurance policy of up to 30 years, which is typically the maximum length that you can get on a term life term policy

If you outlive the length of the term policy, the policy ends there. The music stops you get off the ride and if you still want coverage you’ve got to get reinsured. That’s how term life insurance works.

Term life Insurance Scenarios

Different Life insurance scenarios can affect your future

There are three common scenarios with term life insurance. The most common is that term ends and you have the option to pay a lot more money to reinsure. If you want to keep that term life insurance policy and keep it going, the cost could increase by five or tenfold compared to what you were paying before. If you had an $80 a month premium, you might be looking at a $600 to $800 a month premium payment to keep it going. To continue past that term is not uncommon to pay that much in premium, especially if it was a 30 year term because now it’s based on your age and you have cone that much closer to dying before the new policy expires. The risk is greater for the insurance company.

Also, your health at that time is an extremely serious consideration. This is ,very important to know that going into it.

The second scenario is to simply let your term life insurance policy expire because at that time you might be so old you would not have an option to continue.

The third and less often and less frequent exercised option is getting a return of premium term life insurance, where at the end of the term you get back a portion or even all the money you paid in premiums up until that point.

If you paid $80 a month for 30 years, at the end of the 30 years your insurance company will send every penny you paid in back to you.

Return of premium term life insurance policies cost more to get when you set them up initially. Further, you have to stick for the whole term. Then they send you everything back. The insurance companies make their money on those as if you don’t keep it for the entire length of the policy.

Life insurance companies are eliminating their 20-year return of premium policies and don’t offer anything else lower than that. They are primarily only offering the 30-year term policies options. They don’t offer 10 and 15 year options because it’s not financially profitable for them. Also, the longer the term the less expensive it is. If you can afford a return of premium term life insurance policy make sure it is within budget.

Whole Life Insurance Vs.Term Life Insurance

Let’s say you’re looking at a $50,000 whole life policy versus a $50,000 term policy. Which one is going to cost more?

The whole life policy is going to cost more because it’s never going to increase in costs. The insurance company is taking on more risk with a whole life policy in that they are never going to increase the price of the policy and the coverage is going to bed locked.

Whereas with the term policy,  the insurance companies have less risks because the policies they issue are only going to be a 20 year term, which is still a long time. In 20 years, this insurance is going to run out and they are betting you will outlive that policy and they get to keep all the money you paid in, unless it’s a return premium policy.

It’s a pretty safe bet for them to charge an lower amount of dollars because chances are the policy will expire before you do. They win. You lose. It’s gonna cost a lot more to keep going for a little bit longer and there are limits to how long you can continue on those terms.

We hope this has been helpful. You can reach out to us at or call us at (928) 323-0933. We’ll be happy to help you.