Differences Between Term and Whole Life Insurance

Term life insurance will protect you for a specific period of time, such as 10, 15 or 20 years. After that time, your coverage will cease and all premiums you paid will be forfeited. 

Because of this limited coverage, initial premiums will be less than whole life. However, the premiums may increase with age, while your coverage most likely will not 

You may not need a medical exam to qualify for coverage. If you have certain medical conditions, it can be hard to qualify for whole life insurance. 

A whole life insurance policy will protect you for your lifetime, assuming you pay the premiums. 

Initially, these premiums will be higher than term life insurance, but will not increase over your lifetime. 

Each year, a portion of your premium, and often dividends paid on that premium, will be set aside as your cash value, according to a schedule provided by the insurance company. 

Many people consider whole life insurance policies as a form of forced savings. Cash value policies often add far greater savings dollars than many people could otherwise accumulate and still provide for your family or funeral expenses after your death. 

As the cash value amount increases, you can borrow against the value of your policy for any purpose you choose. If the need for death benefits decreases over the years, you can use the cash value to provide additional funds for your retirement. Or you could use the cash value to pay college expenses for your child or grandchild.