Life insurance policies and plans are an asset, and one should always have a plan for yourself and for your family. When selecting a life insurance an individual has 2 choices- term life insurance and permanent whole life insurance.
The Differences between Term and Permanent (Whole Life) Insurance
There are a lot of differences between the two insurance which might help you in making your decision:
- Based on the length of coverage
Term insurance provides coverage for the specific time period, like 10 years or 15 years. Once the time is up you would have to renew your insurance.
Permanent whole life insurance will give you with lifelong coverage as long as the policy is in force.
- Based on insurance cost
The costs of term life premiums are lower than permanent ones but the cost of term life increases with every renewal whereas it remains same for permanent premiums.
- Based on cash value
Term insurance does not accumulate cash value as it doesn’t have a savings account whereas with permanent insurance there is a savings component known as cash value. One can choose to cash in or borrow against his/her permanent insurance.
- Based on convertibility
Term life insurance can be converted into permanent life insurance whereas permanent insurance cannot be converted.
- Based on death benefits
In the case of term life insurance, the policy may expire before the death of the person because of which one cannot claim the insurance money. But in permanent life insurance, their impermanent financial protection so beneficiaries will be able to receive death benefits even after the death of an insured person as long as the policy is in force.
If you want to save on your premiums and forego the long-term benefits go for Term life insurance and if you want cash value & other benefits then you should go for permanent whole life insurance. Furthermore, remember not to miss out any kind of premium payments.
Remember that any kind of default for payments or by providing wrong information may lead to serious problems and may lead to permanent termination of the plan.