What is the difference between term life insurance and whole life insurance?

Term life insurance and whole life insurance serve distinct purposes and have significant differences that potential policyholders should understand. Term life insurance provides coverage for a specific period, usually ranging from one to thirty years. If the insured individual passes away during the term, the policy pays a death benefit to the beneficiaries. However, if the term expires and the policyholder is still alive, the coverage ends, and there is usually no payout or cash value accumulated. This type of insurance is generally more affordable than whole life insurance, making it an attractive option for those seeking cost-effective coverage for a limited time, often to cover specific financial obligations such as a mortgage or children's education. On the other hand, whole life insurance, also known as permanent insurance, offers lifelong coverage as long as premiums are paid. One of the key features of whole life insurance is the accumulation of cash value over time. A portion of the premium payments goes towards building this cash value, which can grow at a guaranteed rate set by the insurer. Policyholders can borrow against this cash value or withdraw it, although doing so may reduce the death benefit. Whole life insurance comes with higher premiums compared to term insurance due to the lifelong coverage and cash value features. In summary, the primary difference between term and whole life insurance lies in the duration of coverage and the cash value component. Term life is ideal for those seeking temporary coverage at a lower cost, while whole life is more suitable for individuals desiring lifelong protection with an investment component. Those interested in exploring further details about these products can look on the current website of Physicians Mutual Insurance for comprehensive information.