Question

Explain ALL the differences between whole and term life insurance.

Answer 1

Whole life insurance and term life insurance differ in terms of policy duration, premiums, death benefit, cash value, and flexibility.

Step-by-step explanation:

Whole life insurance and term life insurance are two different types of life insurance policies that offer varying coverage and benefits. Here are the differences between the two:

1. Policy Duration: Whole life insurance provides coverage for the entire lifetime of the insured individual, while term life insurance provides coverage for a specific term or period of time (e.g., 10, 20, or 30 years).
2. Premiums: Whole life insurance typically has higher premiums because it offers both a death benefit and a cash value component. Term life insurance generally has lower premiums, as it only provides a death benefit without any cash value accumulation.
3. Death Benefit: Both policies offer a death benefit, which is the amount paid to the beneficiary upon the death of the insured individual. However, the death benefit of a whole life insurance policy remains constant throughout the lifetime of the policyholder, whereas the death benefit of a term life insurance policy may decrease or expire after the specified term.
4. Cash Value: Whole life insurance has a cash value component that accumulates over time. This cash value can be borrowed against or withdrawn by the policyholder, providing a source of funds for various purposes. Term life insurance does not have a cash value component.
5. Flexibility: Term life insurance offers flexibility in terms of choosing the policy duration and coverage amount based on the individual's needs and budget. Whole life insurance provides less flexibility in terms of changing the coverage or premium amount once the policy is in place.