Term and Whole Life Insurance

Caleb Fernholz

Definition

Term life insurance is the original form of life insurance and can be contrasted to permanent life insurance such as whole life, which guarantees coverage at fixed premiums for the lifetime of the covered individual.

Why Get It?

If you were to unexpectedly die, your beneficiary would get some money!

Two Types of Life Insurance

1) Term Life Insurance

This term is simpler! Example if you were to go to an insurance agency and they ask for a premium of $500 every year, or ten years, if you die anytime between those years your family or beneficiaries will get an amount of $500,000. They base this on your lifestyle, like if you smoke or just have bad health they predict how long you will live. After the ten years, if you are still alive, you have to re-apply for a new insurance policy and all of the money just goes to the insurance company.


2) Whole Life Insurance

This insurance policy is not like the term policy because it does not last for a term. It lasts your whole life! Upon death, your beneficiaries will get the pay-off of how much you have been putting in your account. As long as you keep paying the premium it is guaranteeing money to your beneficiaries.

Don't leave your loved ones hanging! Get life insurance today!

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This Khan Academy video will explain the mathematical side of term and whole life policies.