Term VS Whole Life Insurance Plans
Term vs whole life insurance has been the big controversy in the life insurance business from time immemorial. Term insurance was initially designed to be temporary life insurance.
In recent years these policies have become so popular that the insurance companies made some of them insurance for a much longer period of time without a premium increase. An example is the level premium 30 year term policy.
We will look at term vs. whole life insurance on this page. We compare and you decide.
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The companies that want to sell whole life insurance have lowered the premiums considerably and some of them have even created modified whole life policies which is a combination of term life insurance and whole life. Whole life insurance has always been known to be permanent life insurance. It seems there continues to be a contest. Term vs whole life insurance. Here are the policies in question:
- Decreasing Term Life Insurance
- Yearly Renewable Term Insurance
- 5 Year Level Term Insurance
- 10 Year Level Term Insurance
- 20 Year Level Term Insurance
- 30 Year Level Term Insurance
- Whole Life Insurance
To properly show term vs whole life insurance we need to have a description of the policies to see whether there is reason for comparison or whether the two can live side by side in the same universe.
- Decreasing Term Life insurance
As the name implies the face amount of the policy decreases every year. The premiums remain level. Let us say for example you buy a 20 year decreasing term life insurance policy. You pay the same premium every year for the 20 year period yet the face amount is constantly on the decline. This policy is usually used to pay off a mortgage balance upon your death. The result of the term vs whole life insurance comparison…when it comes to this policy and it’s intended I don’t think that anyone could argue that any policy can compare. - Yearly Renewable Term Insurance
This policy is a one year term policy which you can renew each year without having to prove you can qualify for the renewal. The face amount remains level while the premium increases every year. This policy is used for short term needs as people don’t like the idea of the constant premium increase. For the sake of a term vs whole life insurance comparison there are none that can compete with the very low initial premiums. - 5 Year Level Term Insurance
This policy has a level premium as well as a level face amount for the entire term period. It is usually used for short term needs. You may convert this policy to a permanent policy without evidence of insurability during the lifetime of the policy. In a comparison, term vs whole life insurance, you simply cannot conclude that there is any permanent policy that can compete with the 5 year term policy if you give thought to the purpose it serves - 10 Year Level Term Insurance
You cannot compare this policy either as it serves a definite purpose. You may keep this insurance for up to 10 years unless you choose to convert it to a permanent policy. The face amount remains level throughout and so does the premium. This is used for short term needs and sometimes for family situations. - 20 Year Level Term Insurance
This policy is similar to the 10 year term policy but lasts for 20 years. This is used for family situations and at times for business insurance. It can be used to fund a buy-sell agreement in the event of a partner’s or shareholder’s death. It can also be used for key person insurance. When it comes to the 20 year term policy you can compare it with the whole life insurance policy…term vs whole life insurance. The premiums for the term policy is lower than the whole life policy but the cash value and dividends of the whole life policy may be sufficient to offset the difference in price. - 30 Year Level Term Insurance
This policy has a level death benefit and more often than not a level premium. It too can be used for family situations as well as for business needs. The result of the term vs whole life insurance comparison will be similar to the comparison of the 20 year term with the whole life policy. - Whole Life Insurance And It’s Derivatives
Whole life was the original permanent insurance policy. Can one seriously make a term vs whole life insurance comparison?. There really is no comparison between the two types of insurance. The one thing they have in common is that upon death the face amount of the policy is paid to the named beneficiary. Term life insurance really has no cash value. Whole life insurance does have cash values and also earn dividends if the insurance company performs. Dividends are not guaranteed.
Whole life insurance in any form costs more than term but if you consider the cash value available to you during the life of the policy you may decide that the extra cost is worth it. On the other hand if you are going to invest the difference between the cost of the term policy and the whole life policy in some high yield investment then the term policy may be the best one to buy.
You have a tough decision to make when you compare term vs whole life insurance. You be the judge.