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How Term Insurance Is Better Than Permanent/Whole Life Insurance?

Before taking life insurance its better to understand the difference between term insurance and other types of policies. Term insurance is the original form of insurance which is also known as term life insurance. Term insurance is a type of life insurance policy that provides coverage for a specified period of time. It only provides coverage against death and do not build cash value which means if the insured dies during the time period specified in the policy and the policy is active, then a death benefit will be paid to the nominee else insurance company is not liable to pay any amount to the insured at the end of the policy.


Term insurance is the least expensive way to purchase a substantial death benefit on a coverage amount per premium basis. In contrast, permanent life insurance policies are used as a financial investment as insured gets a lump sum amount on the expiry of the policy. Term insurance is a form of risk protection which helps to pay for mortgages, consumer debt, dependent care, and other miscellaneous expenses that may occur after the death of the insured person. Term insurance is the most affordable type of life insurance.

Financial advisers generally advise buying term life insurance and investing the difference elsewhere to those who still qualify to contribute to other tax-deferred investment growth.

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