Differences between Term Life Insurance and Whole Life Insurance?


The compensation standard of life insurance is quite special. Only when the insured dies or becomes totally disabled, will the insurance company pay the compensation. When it comes to choosing a life insurance, many do not know whether it is better to buy a term life insurance or a whole lifetime insurance.


A lot of people may encounter the dilemma considering term life insurance costs less but has a high leverage, whereas whole life insurance ensures the compensated money.


Knowing the differences between these two insurances may help you make the decisions on how to choose one that suits you most.


Briefly speaking, there are three main differences between whole life insurance and term life insurance, the nature of the guarantee, time period of the guarantee, and the premiums of the guarantee.


1. The nature of the guarantee is different.


Term life insurance is a consumption-type insurance: it only provides protection for a certain period of time. If the insured still survives when the term expires, it means that the policy has been “consumed”, where the insurance company does not shoulder the responsibility for paying the insurance money and does not refund the insurance money.


Whole life insurance is a savings-type insurance. That means you can get a lifetime insurance with forced savings. Many whole life insurances will take the age of 100 as the dividing line. Before the age of 100, the insurance company will assume the insurance liability. After the age of 100, the insurance company will pay the corresponding insurance benefits according to the insurance contract.


2. The guarantee period is different.


To put it bluntly, these are two types of life insurance, one is for a period of time and the other one is for a lifetime.


For a term life insurance, you can choose different coverage years, such as 10 years, 20 years, 30 years, or you can choose till how old you would like to be insured.


For a whole life insurance, you are provided the coverage until the death as the insured.


3. The premiums is different.


Firstly, because term life insurance and whole life insurance have different coverage periods, the rate of whole life insurance is much higher than that of term life insurance.


Secondly, because whole life insurance needs to return premiums, compared with term life insurance, there is a huge difference on cost, so whole life insurance turns out much more expensive.


To sum up, how to choose between whole life insurance and term life insurance in general?


It is not a difficult question anymore. The key consideration will depend upon your budget, age, and family liabilities.


Whole life insurance premiums are relatively expensive, but you can definitely get the money. It is suitable for people with sufficient budget, elderly age, and those who focus on wealthy inheritance.


Term life insurance is cost-effective, and is suitable for people with limited budgets, who are in their prime age, and who pursue unexpected accident protection.