Term Life & Whole Life Insurance: What is the Difference

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PostPosted: Wed Dec 17, 2008 6:07 am   Post subject: Term Life & Whole Life Insurance: What is the Difference  

Can any one explain me, i wanted to take insurance policy for my mother. Can any one explain me how term life is different that Whole life insurance.

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PostPosted: Wed Dec 17, 2008 11:43 am   Post subject:   

Term life plan as the name suggests will offer coverage for a limited period, say for 20 years or 30 years. This form of insurance is pretty common.



Whole life plan offers coverage for the entire lifetime of the policy holder for which the policy holder is required to pay fixed premium for the entire period of the policy and failing which may lapse the coverage.

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PostPosted: Wed Dec 17, 2008 11:44 am   Post subject:   

Oh! another important difference between term life and whole life is that, term life is comparatively cheaper than the whole life plans. you can read further about the different types of life insurance policies in the following thread.



http://www.ampminsure.org/insuranceagents/varyinglife.html

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PostPosted: Wed Dec 17, 2008 2:06 pm   Post subject:   

Term life insurance offers you temporary life insurance protection for a specific number of years. Usually, term life is available for 10, 15, 20, or 30 years.



Term life has no cash value that builds up within the policy, it is not an investment.



Term life usually costs alot less than permanent life insurance, depending on your age.



Permanent life insurance is lifetime coverage, as long as you pay your premiums. It builds cash value, but costs more. You may be able to take a loan out from your cash value within the policy.



You can review this article explaining [removed - no promotional url please]term life insurance vs permanent life insurance for a complete review of the advantages and disadvantages of both plans.

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PostPosted: Wed Dec 17, 2008 3:40 pm   Post subject:   

Quote:
TERM Life: there is no 'cash-value' for this, is there?




Return of Premium Term Life Insurance returns all premiums paid at the end of the term.



So if you bought a 30 year ROP term plan at the end of the 30th year you'd get back every penny paid in premium.



The premium is higher for these plans, however, if you took the difference between regular 30 year level term and a 30 ROP term plan and put it in savings you'd have to earn about 7% after taxes on that money to equal the same dollar amount value of getting all your money back.



30 year ROP term is typically only issued up to age 50.


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PostPosted: Fri Dec 19, 2008 5:22 am   Post subject: insurance  

Thanks, GARY. I din't know there was 'sub-policies', (lack of a better word) within the Whole Life Insurance. So.........what if I DID get this ROP, and I wanted to 're-new' it after 20 years(?). Can I still get the premiums back, that I put into it?

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PostPosted: Thu Jan 01, 2009 6:11 pm   Post subject:   

These are very basic definitions of term and whole life:



Term Life Insurance

Quote:
A life insurance plan that provides death benefit protection only and for a specified period of time (term). The policy pays benefits only if the insured dies during the term.





Whole Life Insurance

Quote:
Permanent insurance which provides, at minimum, a level death benefit upon the insured's death, or a cash endowment upon policy maturity that is equal to the death benefit. In addition, these policies accumulate cash values on a tax-deferred basis. A plan of insurance for life, with premiums payable for a person's entire life.
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PostPosted: Fri Jan 02, 2009 5:34 am   Post subject:   

Would term be taken out by like a finance company for insurance on a loan? What is an example of when someone would use term vs whole life insurance?

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PostPosted: Fri Jan 02, 2009 5:45 am   Post subject:   

goodnatured,



Well if you have a 30 yr mortgage, you might buy a 30 yr term policy instead of a whole life policy.



Let's say you have a new born child, and you are only concerned with protecting he/she for the next 30 yrs, you might buy term instead of whole life.



If you just can't afford to buy a whole life policy, you might buy a term policy.



Maybe you can afford whole life, but you would rather buy term and invest the difference.



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PostPosted: Fri Jan 02, 2009 9:07 am   Post subject:   

Quote:
If you just can't afford to buy a whole life policy, you might buy a term policy.




This is perhaps the most common reason why people buy a term life policy. It surely would not have that cash value security associated with a WL policy but it would certainly provide you with all the coverage benefits that would come with a WL policy.



Again, if you're paying to cover a person for a fixed period of time term life could be a better option!

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PostPosted: Tue Jan 13, 2009 5:01 pm   Post subject:   

Term life has no cash values. It is call term insurance because it expires on a certain period of time. If you would say whole life insurance, then you can have cash values on it. Whole life plans does not provide protection for a fixed period of time. You can have lifetime protection with whole life insurance. But remember that term insurance is much cheaper compared to whole life insurance.

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PostPosted: Wed Jan 14, 2009 12:46 pm   Post subject:   

There is no "all the time" answer for the question -"Should I buy whole life or term life insurance?" Every situation is different and it is unwise to listen to the "financial gurus" who tell us to always buy term.



The family of the person who purchased a $1,000,000 20-year term policy

when he was 20, then died at age 43, were left out in the cold.



The argument "buy term and invest the difference" has been around since there was a term policy. I have heard it for the past 20 years, but I have never seen anyone do it - "invest the difference", I mean.



Here's why:



Let's take a Male, age 30, in good health. He can buy a 20-year guaranteed level term policy in the amount of $100,000 for $175 per year.



This same person can buy a $100,000 Whole Life policy for $1,056 per year.



The difference in premium is $881 per year. So this man will attempt to invest $881 every year with the goal of accumulating $100,000 in 20 years (to replace the life insurance policy).



To accomplish this goal, this person would have to earn in excess of 19% interest on his investment. Does anyone know where I can invest $881 per year and earn 19%? It just won't happen.



The term policy is "renewable", which means he can renew it for another 20 years at age 51. The catch here is, the premium is now $792 per year.

The premium at age 52 is $850, and the premium continues to increase evelry year after that.



So, if he keeps the term to age 54, he will be paying more in premium that if he had purchased the Whole Life policy in the beginning.



He couldn't replace the life insurance policy by "investing the difference" because he couldn't get the high gain on his investment.



Don't be pursuaded to buy term with the wrong expectations. Buy your life insurance to fit your needs. If you want to be guaranteed that your life insurance policy will be in force the day you die, term insurance cannot make that guarantee.



You may need both.



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PostPosted: Wed Jan 14, 2009 12:49 pm   Post subject:   

good natured, if you are talking about 'credit life' that is different (and a rip off IMO)...than term ins...much much much better to buy a true term policy than ever buying credit life!



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PostPosted: Wed Jan 14, 2009 8:59 pm   Post subject: Term VS. Whole Life  

Taking Insurance Maze's 30yr old Male:



January 14, 2009

Interest Adjusted Cost Analysis



Face Amount: (1) 100,000.00 (2) 100,000.00

Product 1: Term

20yr



Product 2: Whole Life



Interest Rate: 5.00% Tax Rate: 0.00%(Assuming investment in tax deferred vehicle) After Tax Rate: 5.00%

Year Age Premium 1 Premium 2 1 minus 2 Premiums Saved

1 30 127.00 1,056.00 -929.00 -975.45

2 31 127.00 1,056.00 -929.00 -1,999.67

3 32 127.00 1,056.00 -929.00 -3,075.11

4 33 127.00 1,056.00 -929.00 -4,204.31

5 34 127.00 1,056.00 -929.00 -5,389.98

6 35 127.00 1,056.00 -929.00 -6,634.93

7 36 127.00 1,056.00 -929.00 -7,942.12

8 37 127.00 1,056.00 -929.00 -9,314.68

9 38 127.00 1,056.00 -929.00 -10,755.86

10 39 127.00 1,056.00 -929.00 -12,269.11

11 40 127.00 1,056.00 -929.00 -13,858.01

12 41 127.00 1,056.00 -929.00 -15,526.36

13 42 127.00 1,056.00 -929.00 -17,278.13

14 43 127.00 1,056.00 -929.00 -19,117.49

15 44 127.00 1,056.00 -929.00 -21,048.81

16 45 127.00 1,056.00 -929.00 -23,076.70

17 46 127.00 1,056.00 -929.00 -25,205.99

18 47 127.00 1,056.00 -929.00 -27,441.73

19 48 127.00 1,056.00 -929.00 -29,789.27

20 49 127.00 1,056.00 -929.00 -32,254.18

21 50 293.00 1,056.00 -763.00 -34,668.04

22 51 293.00 1,056.00 -763.00 -37,202.60

23 52 293.00 1,056.00 -763.00 -39,863.88

24 53 293.00 1,056.00 -763.00 -42,658.22

25 54 293.00 1,056.00 -763.00 -45,592.28

26 55 293.00 1,056.00 -763.00 -48,673.05

27 56 293.00 1,056.00 -763.00 -51,907.85

28 57 293.00 1,056.00 -763.00 -55,304.39

29 58 293.00 1,056.00 -763.00 -58,870.76

30 59 293.00 1,056.00 -763.00 -62,615.45

31 60 293.00 1,056.00 -763.00 -66,547.37

32 61 293.00 1,056.00 -763.00 -70,675.89

33 62 293.00 1,056.00 -763.00 -75,010.83

34 63 293.00 1,056.00 -763.00 -79,562.52

35 64 293.00 1,056.00 -763.00 -84,341.80

36 65 293.00 1,056.00 -763.00 -89,360.04

37 66 293.00 1,056.00 -763.00 -94,629.19

38 67 293.00 1,056.00 -763.00 -100,161.80

39 68 293.00 1,056.00 -763.00 -105,971.04

40 69 293.00 1,056.00 -763.00 -112,070.74

41 70 2,477.00 1,056.00 1,421.00 -116,182.23

42 71 2,477.00 1,056.00 1,421.00 -120,499.29

43 72 2,477.00 1,056.00 1,421.00 -125,032.21

44 73 2,477.00 1,056.00 1,421.00 -129,791.77

45 74 2,477.00 1,056.00 1,421.00 -134,789.31

46 75 2,477.00 1,056.00 1,421.00 -140,036.72

47 76 2,477.00 1,056.00 1,421.00 -145,546.51

48 77 2,477.00 1,056.00 1,421.00 -151,331.78

49 78 2,477.00 1,056.00 1,421.00 -157,406.32

50 79 2,477.00 1,056.00 1,421.00 -163,784.59

51 80 2,477.00 1,056.00 1,421.00 -170,481.77

52 81 2,477.00 1,056.00 1,421.00 -177,513.81

53 82 2,477.00 1,056.00 1,421.00 -184,897.45

54 83 2,477.00 1,056.00 1,421.00 -192,650.27

55 84 2,477.00 1,056.00 1,421.00 -200,790.73

56 85 2,477.00 1,056.00 1,421.00 -209,338.22

57 86 2,477.00 1,056.00 1,421.00 -218,313.08

When comparing the rates of two different Life Insurance products it is

important to take into consideration the "time value" or "opportunity cost"

of money. This comparison has done that for you. By taking the year by

year difference in premium costs between two products and investing the

difference at an assumed "after tax" rate of return, we can determine which

premium paying method is more advantageous in any specific year.

For this comparison, Product 2 has been measured against Product1. The

Difference column will show a positive value if Product 2 is less expensive

than Product 1. A positive value in the Premiums Saved with Interest column

indicates a lower accumulating cost difference to the credit of Product 2.

These values are to the credit of Product 1 where negative results occur.

______________________________________________________________________ ______

NOTE: In this example the 30yr old male is taking out a new 20yr policy every 20yrs. The premiums for future purchases are not guaranteed. They are based upon today's cost of insurance charges.



It is possible that the death benefit in the Whole policy will increase at some point and/or that you will be able to suspend premiums on the whole life policy at some point.



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PostPosted: Wed Jan 14, 2009 10:14 pm   Post subject:   

Victor your analysis is to say the least, interesting.



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