It’s easy to be confused about the difference between term life insurance and whole life insurance – so we’ve put together this guide to help you understand the differences so you can choose the right level of cover to meet your needs. Read our previous guide to find out more about all of the different types of life insurance.
What is the difference between term life insurance and whole life insurance?
Both are types of ‘life cover’ which will help families financially when the policy holder passes away. However, despite the similarity between the two, there are major differences which are important factors in understanding how each policy works.
Here is an outline of what these different policies offer:
Term Life Insurance –
- This is an insurance policy to cover you for a specific time period or term, usually a set number of years.
- These policies are for a fixed term and are often purchased to cover something specific, for example a mortgage.
- Basically, if the policy holder passes away during the policy time frame or term, there would be a pay out which could be used to pay bills such as a mortgage or provide financial help for the family.
- There is no investment element to this policy and if the policy holder outlives the policy term there would be no payout.
Whole Life Insurance –
- This is an insurance policy that will pay out when you pass away, however long you live, i.e. it covers you for your ‘whole life’.
- A whole life insurance policy has no term or end date will pay out when the policy holder holder passes away providing premiums are paid and up to date.
- As with term life policies, there is no investment element – but payout is guaranteed, subject to the policy terms, providing premiums are paid and up to date.
It is important to take into account all of your financial responsibilities and the financial needs of your dependents before making any decisions about the cover you need.
If you have any questions or would like our help finding the best policy for you, visit our life insurance quotes page now or contact us below.