Is There a Difference Between Term and Whole Life Insurance?

Is there a difference between term life and whole life insurance? Nowadays, having life insurance is a must, especially if you have dependents counting on you. Insurance provides protection to the family of the insured against the lost of income should the insured pass away. It replaces the lost of income and provides for the future well-being of the beneficiaries. Thus, finding and choosing the right life insurance policy is essential.
Life policies come in various types; the most common are term and whole life. The basic difference of the two is that whole life premium costs more than term life. Term life is designed to be less expensive because it only covers the insured for a specific time period called "term". The term may be issues from anywhere between one year to 20 years. Thus, after the term, the insurance policy expires. On the other hand, whole life insurance doesn't expire; it covers the whole life of the insured.
Taking an in-depth look at the features of the term life, you will find that is available in two premiums: level term and renewable term. In level term insurance, the total cost of the premium is averaged from the number of terms. This means that the annual premium cost is practically the same throughout the coverage term. In essence, the insured pays more in the early years and less in the later years. A similar policy to level term is known as the decreasing term life. In this policy, the premium stays level throughout the term, while the death benefit decreases.
The renewable term, on the other hand, the premium rises upon each renewal period. Renewal period is usually after a 5 to 20 years. Annual renewable term (ART) is similar to this policy; the difference is that the period is renewed every year. It means that the premium costs increases every year it is renewed.
Alternatively, there is the whole life insurance, which as noted above doesn't expire. Whole life obviously costs more because of this. Moreover, the portion of the premium is placed into a savings mechanism attached to the whole life insurance policy; this savings mechanism is known as "cash value". One benefit of this is that the policy holder can use this to pay premiums in the event he or she can't pay for it.
Regardless of the type of insurance, the cost of the insurance increases with the insured's age. Deciding on which type of insurance to avail is dependent on your needs. You can now see the difference between term and whole life insurance. If a short term insurance is needed, term life is probably the way to go; if it is intended for lasts a lifetime, whole life insurance is a better option.