How Whole Life Insurance Compares to Term Life

Whole life insurance is a type of permanent life insurance that provides coverage for the entire lifetime of the insured individual, as long as premiums are paid. Whole life differs from term life in the following ways:

Policy Length and Cash Value

Unlike term life insurance, which covers a specific period, or term (20 or 30 years are common term lengths), whole life insurance offers lifelong protection. This means that when you pass, you will obtain a death benefit regardless of whether it has been 30 years or 50 years from when you bought the policy.

Cash Value Component

One of whole life insurance’s defining features is the cash value component, where a portion of the premium payments goes into a savings or investment account within the policy. This cash value accumulates over time, often at a guaranteed rate of interest, and policyholders can potentially access it through policy loans or withdrawals, providing a source of emergency funds or a supplement to retirement income.

Fixed Premiums

Whole life insurance policies also come with fixed premiums, meaning the premium payments remain constant throughout the life of the policy, providing predictability and stability for policyholders. However, the premiums on whole life insurance are usually greater than term life insurance due to both length and cash value, so cost comes into consideratino.

Guaranteed Death Benefits

As previously mentioned, whole life policies typically offer guaranteed death benefits, ensuring that beneficiaries receive a predetermined sum upon the death of the insured.

While whole life tends to have higher premiums compared to term life insurance, its lifelong coverage, cash value accumulation, and guarantees make it an attractive option for individuals seeking both protection and a long-term savings vehicle. Whole life also is different from Indexed Universal Life, which offers a more aggressive cash value component and non-fixed premiums.

If you’re interested in learning more or getting a quote for a whole life policy, please call 512-922-1273, use our contact form, or schedule a time to speak.