Life insurance is a financial product that provides financial protection to the policyholder’s family in the event of the policyholder’s death. There are two main types of life insurance: term life insurance and whole life insurance. Here is a brief overview of the difference between the two:
Term life insurance is a type of life insurance that provides coverage for a specific period of time, or “term.” This can be anywhere from one year to several decades, depending on the policy. If the policyholder dies during the term of the policy, the beneficiary will receive a death benefit from the insurance company. If the policyholder does not die during the term of the policy, the policy will expire and the beneficiary will not receive a death benefit.
Term life insurance is generally less expensive than whole life insurance because it does not have an investment component. This makes it a good option for people who want to provide financial protection for their family but do not have a lot of money to spend on life insurance premiums.
Whole life insurance, also known as permanent life insurance, is a type of life insurance that provides coverage for the entirety of the policyholder’s life. It also includes an investment component, which means that a portion of the premiums paid by the policyholder is invested by the insurance company. These investments can accrue cash value over time, which the policyholder can borrow against or withdraw if needed.
Whole life insurance is generally more expensive than term life insurance because it provides coverage for the entire lifetime of the policyholder and has an investment component. It is a good option for people who want to provide financial protection for their family and also want to build cash value that they can use later in life.
In summary, the main difference between term and whole life insurance is the length of coverage and the presence of an investment component. Term life insurance provides coverage for a specific period of time, while whole life insurance provides coverage for the entirety of the policyholder’s life. Whole life insurance also includes an investment component, which can provide cash value that the policyholder can use later in life.