Costs of Term Life VS. Whole Life Policies
Why is whole life more expensive than term life? To understand this, you have to understand the basics of each of these life policy types.
Compare Policy Features
- When you purchase whole life, you are also purchasing a policy that may build cash value and that offers to cover you the rest of your life. This means that the insurer is taking a big risk. If the policy remains in force, they will eventually have to pay out the death benefit.
- Term is purchased for a period of time. The insurer underwrites each applicant, and they issue policies when there is actually a pretty low risk that the insured person will pass away during that period of time. In addition, with pure term, there is no cash value accumulated. You just buy coverage, and when the contract expires, you do not have any asset value left.
Which Is Better?
There is not a simple answer for everybody. If you just want the cheapest term life, you will pay less for pure coverage. You get covered for the life of the contact. Both you and the insurer are assuming you will survive the policy. If you do not, your beneficiaries collect a death benefit.
If you are interested in having lifetime coverage that also accumulates value, you may want permanent insurance like whole or universal life.
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