Term and Life Insurance: What’s the Difference?

Want to know the different between term and life insurance? You’re not alone. A lot of people out there don’t understand all the little differences between term and life insurance; consequently they get confused when choosing between term and life insurance. Which should you go with? Which is best for you?

Well, there’s an easy way to find out which of the two – term or life – is better suited for you. And that’s to read this article. (Handy, no?)

On to some definitions. Term protection insurance refers to any insurance plan in which you’re only covered for a specified period (otherwise known as a term) of time. How does that work? When you sign up you decide exactly how long that period will last with the company. Five years, twenty years, twenty years, fifty years, it’s completely up to you. Once you sign up your life will be protected over the course of that term no matter what. Once that time is up, however, your insurance will expire and you’ll be forced to renew. Your premium accrued money won’t carry over; you’ll essentially be starting over from square one.

Not sound terribly good? It isn’t, but for people just starting out it may be the only way. Agreeing to a period is much cheaper (in the beginning at least) than going for a whole life plan. More, you’re not required to pass as nearly as rigorous a credit check. For some people it’s the only way to start out.

Whole life is exactly what it sounds like. You’re covered for your whole existence. Once you die, your money’s paid out. Why is this better than period? Well, obviously, you never have to renew. More, though, your premiums won’t suddenly increase (unless you go for variable premiums, in which case you basically asked for it), and your policy will accrue in value over term. So if you ever decide to sell it later on you’ll be able to, and get a decent amount of money in the bargain.

Whole life is superior in the end. Get it once it’s affordable.