Comparison: Whole Life Insurance vs. Term Life Insurance

Insurance Glossary Terms

1. Whole Life Insurance:

   • A type of permanent life insurance that provides coverage for the entire life of the insured, as long as premiums are paid.

2. Term Life Insurance:

   • Provides coverage for a specific period (term), typically ranging from 10 to 30 years. If the insured dies during the term, beneficiaries receive the death benefit.

3. Cash Value:

   • The savings component of a whole life insurance policy that grows over time and can be accessed by the policyholder through withdrawals or policy loans.

4. Premiums:

   • The amount of money policyholders must pay periodically (monthly, quarterly, annually) to keep their insurance policies active.

5. Death Benefit:

   • The amount of money paid to beneficiaries when the insured person passes away.

6. Policyholder:

   • The person who owns an insurance policy. They pay premiums to the insurance company in exchange for coverage.

7. Beneficiary:

   • The person or entity designated to receive the death benefit when the insured person dies.

8. Term Conversion:

   • A feature in some term life insurance policies that allows the policyholder to convert the policy into a permanent life insurance policy without a medical exam.

9. Underwriting:

   • The process insurance companies use to evaluate the risk of insuring a person and setting premiums accordingly.

10. Riders:

    • Optional features that can be added to an insurance policy to provide additional coverage or benefits, such as accelerated death benefit riders or disability income riders.

11. Guaranteed Insurability Rider:

    • A rider that allows the policyholder to purchase additional life insurance coverage at specified future dates without proving insurability.

12. Cash Surrender Value:

    • The amount of money the policyholder is entitled to receive if they surrender (cancel) their whole life insurance policy before it matures or before they die.

13. Dividend:

    • A portion of an insurance company’s profits distributed to policyholders who have participating whole life insurance policies.

14. Level Premiums:

    • Premiums that remain the same throughout the duration of the insurance policy.

15. Convertible Term Insurance:

    • Term life insurance that can be converted into permanent life insurance without evidence of insurability.

These terms should help clarify key concepts related to insurance policies, making it easier to understand the differences between whole life and term life insurance and their implications for financial planning.