What is the difference between term life insurance and whole life insurance? What is the difference between term life insurance and whole life insurance?

<>Term life insurance is in effect so long as you pay for it and pays out the face value of the policy at time of death. Whole life is an investment policy. Your premiums earn interest which can be paid back to you, added to the value of the policy or be used to pay the premiums, eventually making the policy self-perpetuating. The face value and any accrued interest is paid out at death, or the policy can be used as a retirement portfolio.

In lamens terms, can someone explain the difference between Term and Whole Life Insurance? In lamens terms, can someone explain the difference between Term and Whole Life Insurance?

Think of Term insurance like renting a house. It's a temporary fix or something you get when you can't quite afford to buy a house. Your rent will gradually go up (at the end of each term, term insurance premiums go up), eventually your landlord can kick you out whether you like it or not (eventually term insurance will expire and there's nothing you can do about it) and when you leave you don't get anything in return...you just hand back the keys and say thanks for the help for alittle while. In the short term, term insruance works out to be cheaper, but in the long run it's a lot more expensive than buying a home. If you only need a place to crash for a year or two, terms the way to go. If you need something long term like 20+ years, term will cost you a fair amount of money.

Whole life insurance is like buying a home. It's a more stable long term plan. The price will stay the same (whole life premiums are level for your entire life), your boss can never kick you out unless you don't pay your mortgage (the premiums...whole life doesn't expire [techincally most policies expire at age 104, but most never live that long to worry about it] if you stop paying premiums you lose the coverage...just like term) and if you decide to leave you get your equity back out of the house. You also have the option to put a little extra money into a home when you own it to increase the value (the cash value/policy fund), so when you do move on you get a little extra out of it if you want. Again, Whole life is good for a long term solution, but if you're only planning on using it for a couple years and cancelling it's not worth the inverstment.

Both have a purpose and both are great in certain situations. Anyone that flat out says renting is the best way to go, or that buying is the only way to go, doesn't fully understand how each will benefit certain people.

What is the diffrence from whole life & term life insurance's? Isn't there one that you pay off?

One you can pay off be fore you die and the other you pay till you die(or certain)

Term life insurance generally provides a set level of protection for a definate period of time, or term. Most often these policies come in 10, 20, and 30 year terms and only pay if you die during the term of the policy. There are some varieties on the term policies which will return your premiums in the event that you outlive the policy, so it is not always wasted money.

Whole life, or permanent insurance, offers protection until a set age, usually 121. Most whole life policies have a set time frame that you pay on the policy for, or an age at which the policy is paid off. The basic whole life contract with my company is considered paid at age 100, but once again there are variation here as well.

My company also offers whole life policies where the premiums are paid off after 10 years, 20 years, or at the age of 65, but the policy remains in effect, continuing to accumulate cash value, until the age of 121.

How do I determine if Term or Whole Life Insurance is best for me? How do I determine if Term or Whole Life Insurance is best for me?

First, you need to find out your need. Do you need this for the rest of your life because you believe you will be broke forever or just temporary because you don't have much saved right now, but can start saving for the future?

Second, you need to understand the products.

Whole life insurance is a type of plan that is a level term to age 100 plus a savings plan attached to it. Because of the savings plan, whole life insurance is very expensive. Your cash value grows tax-deferred at a 1-3% APY and you can borrow it anytime. Just like any loan, you will owe monthly interest on it at a rate of 6-8%/year. If you borrow, your death benefit will be reduced by whatever amount you borrow until you pay it back. When you die, your beneficiary will only get the death benefit, but all the cash value will be kept by the insurance company.

Term insurance contains no savings plan, therefore it gives you flexible options on where you want to save your money. It is inexpensive and is there to fill a void until you do build enough wealth that you don't need life insurance anymore. Premiums remain level up to a certain point, which depends on what type of level term insurance you get. Is it 10 year, 20 year, 25, year or 30 year term? When the level term expires, your premiums will go up. You may cancel the policy, convert it to a whole life policy, exchange it for another term policy, or renew it.

I have always sold term insurance and help clients invest their money 100% of the time. That way they can rent wealth (term insurance) while building wealth (investing). What if the client does die during the term? The family will get the death benefit plus all the investments versus if this was whole life, you only get one of the above. If client does live through the term, in 20-30 years, their investment profile has grown, they have less financial obligations, so the need for life insurance declines. Depending on how much they saved, they probably don't need life insurance or need as much coverage.

Lets say you are 30 years old and you bought a $100,000 Whole Life policy and pay about $100/month ($1200/year), hypothetically? I don't know how much of it goes toward insurance and how much it goes toward the cash value, but lets hypothetically say that $55/month goes into cash value, $20 goes toward insurance, and the rest goes toward fees. The insurance company gives you an interest rate of 2% on it. In 30 years, this will grow to $27,145. By this time, you paid a total of $36,000 in premiums. So you have a loss of almost $9000.

What if you had a 30 year term policy of $100,000 and paid $20/month ($240/year) toward it and you put $55/month into an IRA and the mutual fund had an average rate of return of 10% over a 30 year period? In 30 years, you can potentially have $125,363. Its not guaranteed you will get 10%, but even at 8% is better than what you get in a life insurance policy because life insurance policies have lots of fees that eats away the returns on the savings.

If you invested the difference of $80/month at a 10% rate of return, in 30 years you can potentially have $182,346.

If you built this amount of wealth, do you think you will still need life insurance in 30 years? Maybe, maybe not. I don't know what your needs going to be in 30 years, but until then, all you have to focus is what you need now and worry about that later.

What the differents in term life& whole life insurance? What the differents in term life& whole life insurance?

Term insurance is available for set periods of time such as 10, 15, 20, or 30 years. It pays a death benefit during the specific period of time. At the end of the term period, there is no insurance in force unless you renew the insurance for another term period. You can renew term insurance policies for another term period even if your health has changed. The premium rates increase at each renewal date.

There is also annual renewable term life, where your policy automatically renews each year and premiums increase as you get older. Choose level term insurance if you want your premium to stay the same for the duration of the policy.

Also available is decreasing term insurance, where premiums remain level but your death benefit declines over time. This is good if you want to cover only a specific debt that decreases, such as a mortgage or business loan.

As long as you pay your premiums, the company cannot cancel you. Term insurance generally offers more insurance protection for your premium dollars; however, as stated, premiums increase at the end of the term period. It is good protection for needs that will disappear in time, such as mortgages or car loans.

Term life insurance is a popular choice because of the long rate-guarantee periods and because premiums are at all-time lows. However, if you get to the end of your policy term and still need life insurance, you'll need to shop for a new policy, which will then be priced based on your older age and health status.

Choosing an initial rate-guarantee period is easy: Match the period of time your dependents need your income to the available rate-guarantee periods. For example, if your children are young and you have decades to go on your mortgage, try 30-year term life. If your children are leaving the nest and your home is paid off or nearly paid off, 10-year term would fit the bill.

Other policy provisions that drive the popularity of term life insurance are guaranteed renewal and guaranteed convertibility. Before you buy a term life policy, ask the agent or company to confirm to you that the policy contains a guaranteed renewable option, which grants you the right to continue coverage beyond the initial rate-guarantee period without a medical exam. This feature, found in most term life policies sold today, is extremely important should you become sick and uninsurable toward the end of your rate-guarantee period. For example, say that you’ve been paying $800 per year on a $500,000, 20-year level term life policy and develop cancer near the end of the 20-year period, thus making you uninsurable. Assuming that you want to continue the coverage, a guaranteed renewable clause would allow you to continue the coverage beyond 20 years on an annual renewable basis without an exam, although at a much higher annual premium of, say, $8,000 in year 21, $11,000 in year 22, and so on. These premiums don’t look so high when you are very sick and uninsurable but still in need of coverage.

Another built-in feature of most term life policies is the right to convert your coverage to any whole life or cash value policy that the company might offer at current rates without having to take another physical exam. This feature may be of use in the future if you decide you want cash value life insurance.

If you'd like term insurance to cover you for a certain period of time but you're confident you'll outlive the policy, consider a return of premium (ROP) term life insurance policy. Under this type of policy, if no death benefit has been paid by the end of your insurance term, you receive all your premiums back tax-free. Return of premium term life insurance generally costs 50 to 150 percent more than a comparable term policy but it provides a way to hedge your bets no matter what happens.

Whole Life insurance, also referred to as cash value insurance, provides protection for life. As long as you pay the premiums, the death benefit will be paid. Premiums are higher than term insurance; however, part of the premium is invested by the company and builds up a cash value. This cash value will accumulate and may be available if you surrender the policy; or, if you stop paying premiums, you can use the cash value to continue your policy at the current death benefit for a specified time or at a lesser death benefit covering you for your lifetime. Part of the cash value may also be used as collateral for a loan, or you may borrow from the cash value of the policy.

If you want more than a death benefit from your life insurance policy and like the idea of a long-term savings account (not insured by any federal agency) or stock market investment, you might consider whole life, universal life or variable life. Be prepared to pay much higher premiums per $1,000 of coverage because you are now funding a cash value account and paying fees and expenses.

In many cash value policies, the annual premium does not increase from year to year. Universal life policies allow you to fluctuate or even skip premium payments, which in turn adjusts your death benefit amounts.

Unlike term life insurance, which is easily compared online, cash value insurance is often marketed by agents and brokers in a face-to-face setting, where needs and strategies can be discussed.

Because of the complexity and dizzying array of possible outcomes for permanent life insurance, regulators insist that cash value insurance be sold using pre-approved illustration formats. These illustrations can run to 15 or more pages. Cash value life insurance illustrations are divided into two major sections: guaranteed values and projected or “illustrated, non-guaranteed” amounts. Illustrations can be complex and hard to compare in an apples-to-apples way.

Pay particular attention to the guaranteed death benefit and premium-payment sections because these columns contain the actual company promises. If you don’t like what you see there, walk away.

Many cash value policies contain harsh penalties for surrendering the policies in the early years. Changing your mind within the first few years is an expensive decision.