What is the difference between life insurance and term insurance

Both term and whole life have a place in filling the needs of people at different stages of life and for different purposes.

Term is a death benefit only policy that has a specific time span after which it usually can be renewed but at a higher price…..If a term and whole life were purchased at the same time, the term premiums would be a fraction of the whole life premium.

Whole life is a policy that accumulates cash values, lasts for the insured’s “whole life” , never increases in premium.

Term should be considered when the need for a large death benefit is very important for a specific term in years. (Young couple, depending on each other’s income to make ends meet particularly when have a mortgage and young children to raise)

Whole life should be considered when a death benefit is needed but other assets are sufficient to provide for the needs of a surviving spouse and children.

There is benefit in whole life from this perspective. If young and healthy when first purchased the premiums will be relatively low, never go up and accumulate large amount of cash over the insured’s lifetime.

As people age, term policies continue rising in price and eventually become unaffordable, un-renewable or even unavailable.

Whole life cash values can be borrowed or be cashed in if the need arises.

There is a theory of : “buy term and invest the difference”. In theory that sounds good but rarely do people have the discipline to do that and there is always risk in investments. Which is best? Like shoes the best is what fits and makes you most comfortable.

Whole life insurance

These policies offer cover for the entire life of the insured, for a fixed premium payable during the entire coverage period. On death of the insured, the sum assured is paid to the beneficiaries. The premiums are typically higher since a death benefit is a certainty.

There are variants where the premium is payable only for a specified period. Similarly, variants provide for some return of premium during the life of the insured.

Term insurance

This is a pure risk policy. Insurance premium is lowest for such policies, because there is no savings component in the policy i.e. at the end of the insurance period, if no claim has been made, nothing can be recovered from the policy. The low cost enables taking insurance to the level required to protect the goals and needs of the individual. And in the event of death of the insured, it eliminates the risk of not being able to meet goals on account of being under-insured. The individual has to make separate provisions for saving for the goals since there is no payout from the policy if the insured survives the term of the policy;

Source :- Quora