What Is The Difference Between
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There are so many nonsensical pages on the internet discussing this question. Everyone who has an opportunity to give an opinion is giving an opinion. The thing is that this cannot be debated. Let us look at the facts.
Term insurance is simply an agreement between a policy owner and an insurance company that the company will pay a specific sum upon the death of an insured person. This is subject to the payment of an agreed premium by the owner of the policy. Term insurance lasts a specific number of years...10 years, 15 years, 20 years for example.
Whole life contains the same agreement as term life insurance but whole life lasts longer...for the rest of your life or until age 100, whichever comes sooner. Whole life has a cash surrender value, term life doesn't have a cash value.
If the whole life policy is a participating policy you earn a dividend on top of your cash value if the company performs well and if they declare a dividend. Dividends are not guaranteed.
Whole life dividends can be used in different ways. The owner of the policy gets to choose how they are used.
Whole life insurance costs more because it lasts longer than term insurance. The life insurance company is at risk for a longer period of time. The longer the guarantee of coverage the more it costs. A 5 year level term policy costs less than a 10 year level term policy.
A 10 year level term policy costs less than a 15 year level term policy...and so on. Because whole life insurance last until age 100 it will cost more than any term policy if purchased at a given age.
What is the difference between term and whole life? Now you know.
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