Lesson 2: Term Life vs Whole Life Insurance
Term Life Insurance:
- Lasts for a specific time (10, 20, 30 years)
- Pays a death benefit only if the insured dies during that period
- Has no cash value
- Lower premiums
- Good for temporary needs (like mortgage coverage or raising children)
Whole Life Insurance:
- Permanent coverage (lasts entire lifetime)
- Pays death benefit no matter when the insured dies (as long as premiums are paid)
- Has cash value that builds up over time
- Premiums stay level
- Can borrow against the cash value
- More expensive than term
Comparison Table:
| Feature | Term Life | Whole Life |
|---|---|---|
| Duration | Fixed term | Lifetime |
| Cash Value | None | Yes |
| Premiums | Lower | Higher, but level |
| Death Benefit | Only during term | Guaranteed for life |
| Uses | Temporary needs | Long-term or lifelong |
Texas-Specific Tip:
Texas requires that all life insurance policies clearly show whether they are term or permanent.
Flashcards
What is the duration of term life insurance?
Lasts for a specific time (10, 20, 30 years).
Does term life insurance have cash value?
No, it has no cash value.
What are the premiums like for term life insurance?
Lower premiums.
What is term life insurance good for?
Temporary needs (like mortgage coverage or raising children).
What is the duration of whole life insurance?
Permanent coverage (lasts entire lifetime).
Does whole life insurance have cash value?
Yes, it has cash value that builds up over time.
What are the premiums like for whole life insurance?
Higher, but level.
Can you borrow against whole life insurance?
Yes, you can borrow against the cash value.
When does whole life insurance pay a death benefit?
No matter when the insured dies (as long as premiums are paid).
What does Texas require about life insurance policies?
Policies must clearly show whether they are term or permanent.