Given the choice term insurance or whole of life what's better?

Making sure you have the right life insurance contract for your particular situation can be quite hard. The reason for this is you first have to take into account your own personal circumstances and second how these will in turn influence the particular choice of plan you make. There may be some people that will benefit from life insurance for the whole of their lives and others that may just require cover for a set period of time. This page will hopefully indicate the differences between term insurance and whole of life cover and in turn give you an idea as to which one might be suitable for you.

The primary difference between term and whole life insurance is simple: term insurance offers only life coverage. A term policy does not build a cash value over time. When the person (or persons) covered by the term policy pass away, the death benefit of the policy is paid to a beneficiary.

Whole life insurance works differently. Whole life combines the life coverage and death benefit of term insurance but also provides a vehicle for investing. Over the years the whole life policy is held the investment builds a cash value. The decision regarding which policy is better requires taking a closer look at each type of insurance and the needs of the person seeking coverage.

Typically, a whole life policy is more expensive than a term policy. This is due to the investment element of whole life that is funded during the years the policy is held. Term insurance, without the investment component carries a low premium.

Due to the lower premiums a lot of clients will always go for the lower cost term insurance. And a lot of people do find that they just need a set policy for a set period paying out a set sum assured all the things the term insurance does quite well. In addition a lot of people do consider that any money save by opting for the cheaper term plan can be invested separately to produce a greater return than that offered within the whole of life contract.

It has to be said that most financial advisors still recommend whole of life insurance more that level term owing to the fact that they understand establishing a cash value in the plan and the resulting higher premiums is more a benefit to clients than a detriment.

People who find themselves in position of great wealth with a complex need for estate planning in order to protect their assets, may find that a whole of life insurance contract that builds a cash value, may be of great benefit to them. In addition business people looking to ensure that their families are taken care of should they pass away may also find that this type of cover very effective indeed.

However, if a father simply wants an insurance policy that provides for his family's needs if dies, a term policy with a low premium may be the perfect solution. The low premium is usually easy to afford. Further, if he chooses to invest for the future, he can do so with the money saved from the lower term insurance policies.

All that said the particular insurance policy that is most suitable for you will always be dictated by your particular needs and those of your family or dependents. As whole of life insurance could be a good solution for some people, term insurance will always be better for others. Making the right choice will always need great thought about your financial position and that of your family in the event of your death.