What is the difference between term and whole life insurance?

October 22, 2014

Two main types of life insurance are term and whole life. Term insurance is the least expensive type of insurance you can buy. It is for a set period of time, such as 10, 20 or 30 years. If you buy a 20-year term insurance policy with a benefit of $500,000, then if you pass away after those 20 years are up, your beneficiaries wouldn't get any of the life insurance benefit. The goal is that by that time (after 20 years) you have accumulated enough assets to be your own insurance policy.

Whole life insurance is for your whole life. It is more expensive because there is no set term and some of the money you spend in your premium goes into a cash value account. Most of the time you don't necessarily know how much you are paying for insurance and how much of your money is going to the cash value, which is basically a savings account.

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