What's the Difference Between Term and Whole Life Insurance?

Everyday, people ask me what the difference between term and whole life insurance is. Most people are so confused about life insurance that they just throw their hands up in the air and give up. In a nutshell, term life insurance provides a death benefit for a certain term or time period and has no value. A whole life policy on the other hand provides a death benefit for your whole life and has a cash value available to you while you are alive.

In the end, though, a lot of people who buy what they think is a whole life policy, end up buying a policy that won't last their whole life because the premiums are not guaranteed to stay the same for their entire life. Therefore, at some point, they can't afford to keep their policy. It then lapses and has then become a very expensive term policy.

This happens because people don't know what they are buying and many times get their policy from a friend who just started in the business and they don't understand what they are selling rather than working with a specialist who deals with life insurance all of the time and knows the products and the guarantees.

Because their is so much confusion, the insurance companies win either way. Agents convince policy holders to give up policies that are guaranteed to pay while exchanging them for policies that "might" pay. The fact is that most term policies never pay and so the insurance companies profit from both types of policies since neither has to pay because one is cashed in before it had too and the other lapses because the term expires.

It's very easy to get someone to give up a whole life policy because the premiums are higher and the face amounts lower than term. People think with their wallet and go with the easy way out.

What's the best thing to do. Buy some whole life and also buy a large term policy. That way, you'll have a way to pay for your burial when all the term expires and if the worst happens before you expect it, your term will provide a much more cash for your beneficiaries. Also, you'll need to resist the temptation to let go of your whole life insurance and let the insurance company off the hook.

The most likely scenario is that all of your term will expire worthless because you'll outlive it. The whole life policy you purchased will then help you pay for your final expense.

source" www.ezinearticles.com