Long Term Versus Whole Life Insurance

Life insurance policies pay a predetermined death benefit upon the death of the insured.

Long term and whole life insurance both have very distinct advantages and disadvantages. Thought should be given to which type of insurance will work best for the policy holder.

The Facts

Life insurance, either long term or whole life, will pay a predetermined death benefit upon the death of the insured. The payout amount is decided when the policy owner purchases the insurance policy.

Premiums

Whole life insurance has higher premiums than long term life insurance. Whole life policies provide a return on investment. The higher premiums are charged for whole life insurance for investment purposes. A long term policy does not offer investment returns. The premiums charged are for the insurance only.

Dividends

Some whole life policies provide an opportunity for dividend earnings. Long term life insurance policies do not have dividend earning potential.

Cash Values

Long term life insurance does not offer cash value accumulations. Whole life insurance policies accumulate cash values, which the policy owner can withdraw up to preset limits set at the time of purchase.

Policy Loans

Long term life insurance policies do not offer policy loans. Whole life insurance policies offer the opportunity for policy loans after the policy has been in effect and earning cash values for three or four years. The waiting period for policy loans varies somewhat from state to state.

References

• New York Life: Term Life Insurance
• CUNA Mutual Group: Life Insurance: Cash value policy basics