Although life expectancy gives us an estimate of when a person can pass away, death remains unpredictable. A good advice would be to ensure you leave your loved ones with substantial financial protection.
Therefore, this article puts two of the most used insurance policies side by side.
Time Range: Term insurance covers only a period of the policyholder's life. The maximum duration you can purchase is 30 years. However, few insurance companies offer 35 or 40 years. On the other hand, whole insurance lasts till the policyholder dies. If you want the policy to end after a few years, you have to pay surrender charges.
Package: Term insurance is the cheapest form of insurance, while whole insurance is quite expensive. Also, not all types of term insurance policies permit a fixed premium. In contrast, you can lock in your premium for life. If you have outstanding loans, they play a major part in reducing the death benefit of whole insurance. But whole insurance pays more death benefits than term insurance. A good reason for this is that it can last longer, and the premium is more expensive.
Addendum: Term insurance is restricted to only insurance purposes. Whole insurance has several other benefits from which the policyholder and beneficiaries can benefit. For instance, some insurance companies pay a dividend to their policyholder. Likewise, its savings feature helps to improve cash value.
Usage: Term insurance is considered easier to understand and use. For example, it guarantees death benefits. But once you take out cash value from the whole insurance, the death benefit is reduced. Moreover, it offers flexible usage like opting out, renewal, and converting. Above all, calculations like risk, loan repayment, savings, etc., are much easier to calculate. In fact, insurance companies may ask you only the term you wish for the insurance to cover.
The better choice between term and whole insurance is based on your need and if you can afford higher premium options. Of course, they both have their pros and cons. Hence, whole life insurance is better for you if you need coverage time and extra options.
For instance, whole life insurance is better if you have a special needs dependent. But if you need simplicity and short use, you can pick term life insurance.