Term Life Insurance

Term Life insurance is the most straightforward type of life insurance policy available. It is in effect only for a pre-determined amount of time, as few as 5 years for most policies, or as much as 30 for others. These policies require a straightforward premium payment for a cash benefit payable to the beneficiaries you designate upon your death. At the end of the policy term, the policy is cancelled, enabling you to renew it if needed or seek insurance elsewhere.

Whole life insurance policies, on the other hand, are usually designed to last you your entire life, from start of policy until the end, whenever that may be. The difference is in the 'cash value' or cash account that usually comes along with these policies. Your increased premiums partially fund a savings account in addition to your policy that may offer additional benefits after your account or policy matures. Maturity dates on your insurance policy vary as well as the benefits you will receive when it does. For some accounts, you will be allowed to borrow money from the account as a loan, or receive money from the account in addition to the death benefit when you die.

Term Life insurance is good for you, if you plan, very seriously to be financially independent within the next 10 to 20 years. Financially independent people have little need for a policy to pay their loved ones after their death. Otherwise, whole life insurance may be the best bet, since you won't have to worry about paying an increased premium for a new policy at the end of your current one. Also the cash value account may wind up serving a significant benefit to you at some point in your life. Finally, many whole life policies do not require that you have to pay your premiums any longer beyond a certain point. Therefore, the money you've invested into the policy can come back to you as an additional benefit after your death that you may have spent years or decades not paying for anymore.