Can anyone explain whole and term life insurance in layman's terms?

I need a super easy explanation....so, keep it simple.

All life insurance pays a death benefit when the policyholder dies. The death benefit is intended to replace the lost income of the deceased, allowing the survivors to maintain the lifestyle they enjoyed before the love oneâ€™s passingâ€”at least for a period of time. Both term life and whole life accomplish this goal.

The major difference between whole life and term life is the amount of time the policy covers. As the name suggests, whole life covers the policyholderâ€™s entire life, until death. A term policy insures the life only for a certain number of years, known as the term. When the term is up, the coverage ends. If the policyholder wishes to continue term life coverage, he or she must take out a new policy. This is an important juncture, critics of term life point out. If the term life policyholder has developed a serious illness, such as AIDS or cancer, insurance companies may not be willing to insure the lifeâ€”or the premiums will be so high that the insurance will be out of reach. With whole life, coverage continues no matter what health problems the policyholder develops.

Since term life policies often expire without the insurer needing to pay a death benefit, the cost of term life insurance is much lower than the cost of whole life. In fact, term life insurance costs several times less than whole life insurance does. Affordability is term lifeâ€™s main advantage. If a person has just started a family, he or she can take out a 20- or 30-year term life policy, knowing the family will be provided for should anything happen to the policyholder. After that, the term lifers argue, life insurance is no longer critical. With children grown, the mortgage paid off, and retirement in the offing, the policyholder can afford to allow the term policy to end without taking out another. The term life policy will have served its purpose.

This is another difference that whole lifers point to as a shortcoming of term life insurance: Once the term ends, all the money spent on term policy premiums is gone. The policyholder and his or her family will never see the money again. This is not the case with whole life insurance premiums. Since the policy covers the insured until death, the death benefit will be paid, which means the premiums will be recovered by the family. In addition, the insurance company invests the premiums, and the policy accrues what is known as cash value. The policyholder can borrow the cash value and pay it back to the insurance company. If the policyholder wishes to cancel the policy, the cash value will be paid to the policyholder. The amount paid out at the time of cancellation is known as the â€œsurrender value.â€

In basic terms... "whole-life" insurance will have higher premiums for the same coverage but will build equity or a cash value that can either be borrowed upon or even cashed out later. "Term" life insurance does not have a cash value and may be paid out for the amount of the policy at the time of death of the insured. Hope this helps.

In the most basic of forms, whole life insurance is life insurance that earns money and you can cash out on, to get whole life insurance, you typically have to have a medical examination and whole life insurance typically costs more than term life.

Term life insurance is less expensive than whole life insurance, does not require a medical examiation to get and is for a set amount and never earns money. If you purchase term life for $25,000 it will always be worth $25,000.00

I hope this helps explain it at the most basic level without getting too complicated!!

Term insurance is life insurance where the premium you pay is locked in for a term period of time such as 5,10, 15, 20, or 30 years. At the end of the term, the coverage is still available but the rate you pay will increase each year therafter.

Whole Life - is life insurance with a cash building component based on ASSUMPTIONS that interest rates and dividends will perform at an assumed rate of return. As long as the assumptions hold true, the premiums stay the same, and the death benefit continues as long as you live.

In very simple words...

WHOLE LIFE
1) Pay premiums for rest of your life until age 100.
2) Very expensive.
3) It builds savings which can only be accessed by borrowing from it or canceling the insurance.
4) Lose all cash value upon death

TERM
1) Pay level premiums for certain period (1 year, 5, 10, 15, 20, 25, 30, or 35 years)
2) Most term policies are guaranteed renewable until around the age 100, meaning you don't provide proof to see if you are insurable
3) Its less expensive than whole life by 2 to 5 times.
4) Doesn't build cash value, so you can put your money somewhere else such as mutual funds or bank accounts.

WHAT THEY HAVE IN COMMON:
1) It provides a death benefit
2) Both are insurance contracts.
3) You are covered until the age of 100 (plus or minus 10 years, depending on the company you go with)

Term insurance locks in a rate for a specific period of time - 1, 5, 10, or 20 years. If you want to keep it past that term, the rate goes up.

Whole life locks in the rate for your whole life - as long as you keep paying.

Term insurance is much cheaper. Term insurance is "pure" insurance.

Whole life adds a "savings" account, where part of what you pay in gets set aside, but if you die, the savings goes to the insurance company. You can borrow against the amount you've "saved", but you pay the interest to the insurance company, and if you die before you pay it back, the insurance company deducts the loan amount from the payout.

It gets lots more complicated, but that's the gist of it.

A super easy explanation: Life insurance in analogous to a home. You can lease a home for a certain period of time, which is like term insurance, or you can own your home for the rest of your life, which is like whole life.

so if you have a $75 T whole life and keep paying premiums and they say basic additions amount to $95 T. would this be the death benefit 95T even though the original amount was say $75 T. This is confusing and I hope someone can answer. Thank you.

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