One offers coverage for a fixed period at a lower cost, while the other provides lifetime coverage with higher premiums. But is the lower cost of term insurance truly the better option? Let’s dive in.

Term insurance is often the first choice for those considering life insurance because it allows them to allocate extra funds toward their own investments.

As the name suggests, term insurance covers the policyholder for a set duration—such as 20 years or until age 65. If the policyholder outlives this period, the policy ends, and no payout is made since there’s no cash value accumulated. Coverage is only assured as long as premiums are paid at each renewal. Additional riders can be added for early or major-stage critical illness coverage.

Whole life insurance, on the other hand, offers coverage for the policyholder’s entire lifetime. Upon retirement, the policyholder can opt to surrender the policy and receive the accumulated cash value. Just like with term insurance, riders for early and major-stage critical illness can also be added.

Regarding premiums, term insurance is more affordable initially but increases significantly as the insured ages if the insured wants to increase the coverage term or amount. In contrast, whole life insurance premiums remain fixed throughout the payment period. Whole life insurance is also slightly pricier as there is a cash value element in it.

When thinking about financial diversification, whole life insurance can serve as a long-term financial asset due to its cash value component, which grows if the policy is maintained.

In conclusion, the decision between term and whole life insurance hinges on your financial objectives, budget, and desired length of coverage.

Written by Gilbert Tang, Financial Services Consultant