What's the difference between term insurance and life insurance?

are terms that are sometimes used interchangeably, but they refer to different types of life insurance policies. Here are the key differences between term insurance and life insurance (specifically, whole life insurance):

Term insurance provides coverage for a specified period, such as 10, 20, 30, or more years. If the policyholder dies during the term, beneficiaries receive a death benefit. If the policyholder survives the term, there is no payout, and the coverage typically expires.

Whole life insurance provides coverage for the entire lifetime of the insured individual. As long as the premiums are paid, the policy remains in force until the insured person's death, at which point the beneficiaries receive a death benefit.

Term insurance policies generally have lower premiums compared to whole life insurance. Premiums are level for the duration of the term but can increase significantly if the policy is renewed after the initial term expires.

Whole life insurance policies have higher premiums than term policies, but these premiums remain level for the entire life of the policyholder. Part of the premium payments goes toward building a cash value component within the policy.

Term insurance policies do not accumulate cash value. They are purely death benefit policies, and there is no savings or investment component.

Whole life insurance policies include a cash value component. A portion of the premium payments goes into a savings or investment account within the policy. This cash value grows over time on a tax-deferred basis and can be accessed by the policyholder during their lifetime through policy loans or withdrawals.

Term insurance is typically used to provide temporary financial protection for specific needs, such as paying off a mortgage, funding a child's education, or covering debts during a particular period of financial vulnerability.

Whole life insurance is often used for long-term financial planning, estate planning, and leaving a financial legacy. It provides lifelong coverage and can be part of a comprehensive financial strategy.

Term policies are flexible and can be chosen based on the desired term length and coverage amount. They are relatively simple and cost-effective.

Whole life policies offer less flexibility in terms of premium payments but provide guaranteed coverage for life. They also offer access to the cash value component, which can be used for various purposes.

The choice between term insurance and whole life insurance (or other types of life insurance) depends on an individual's financial goals, budget, and specific needs. Term insurance is often favored for its affordability and simplicity, while whole life insurance is chosen for its lifelong coverage and cash value accumulation. It's important to carefully consider your financial situation and objectives when deciding which type of life insurance is right for you.