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What Is The Difference Between Whole Life Insurance And Term Life Insurance?

April 19, 2012 | Comments: 0 | Views: 141

There is quite a large difference between term and whole life insurance, but for the layman, these differences might not always be so clear. However, it is important to understand these differences prior to shopping around for life insurance among all the major companies. Both of these options have benefits and drawbacks, so the choice really depends on your unique situation, wants, needs and goals. Your age and budget are among the most important factors to consider in your choice, but there are also many other issues you must ponder prior to making this important decision.

The biggest distinction between these two types of life insurance is their length. Whole life insurance lasts as long as the policyholder's life, ensuring that loved ones will have enough funds to cover burial costs and legal expenses, and to retain the quality of life they're accustomed to. People often purchase this type of insurance policy when they are young and healthy, since it is more affordable to purchase these policies at a younger age and healthier status, and there is no telling how long the policyholder will live for. Whole life insurance premiums remain consistent for the life of the policy, making it easy to plan for the future.

As the name may imply, term life insurance lasts for a pre-specified "term." The specific coverage period may be anywhere from one year to 30 years, and the premiums will vary accordingly. People often purchase term life insurance policies when they experience major life changes, such as the birth of a child or the purchase of a substantial item (such as a house) with borrowed money. Once the coverage term is over, however, the policy will expire and the policyholder will have to purchase a new policy to keep himself or herself and his or her loved ones covered.

Some people purchase both types of insurance at the same time, which can solve some of the problems associated with either type of policy. You may purchase a very reasonably priced whole life insurance policy while you're young, for example, then add a term policy when you are experiencing one of those big life changes. The additional coverage from a term policy will help you rest assured that your family will not be burdened by debts if you should pass away. It's not something anyone wants to think about, but for the sake of your loved ones, it's important that you do.

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