Buying Life Insurance: The Difference Between Term and Cash Value


life insurance term and cash valueBuying life insurance is the best way to ensure that your loved ones are taken care of should anything happen to you. It will provide much needed money to those who rely on your income so that they are not left scrambling to pay bills or worried about maintaining their standard of living.

When you go to buy life insurance, there are two kinds you can choose from: Term Insurance and Cash Value Insurance.

Term Insurance

In almost every case, term insurance is the kind of life insurance that you want to consider. It is the straightforward policy that we are all used to. You pay into it monthly and, in the event you die, your beneficiaries collect a sum – simple and straightforward. It is important to note that term insurance benefits are only paid out if you die during the term of the policy. Of course, there are many things to consider when taking out this kind of insurance, including the term (you can choose 5, 10, 15, and 20 year policies), and the cost of premiums.

Remember that insurance companies are in this business to make money and if you are over 70, you may find that your options for life insurance are limited or non-existent.

Cash Value Insurance

Similar to Term Insurance, except that it covers you for your whole life and the benefits are paid out upon your death, no matter when that is.

Also known as Whole Life insurance, this policy pays out benefits upon your death, but also accumulates money that you can use before you die. The idea is that some of the premiums you have paid over the years are made available to you in an account. You can keep the money or borrow against it – basically whatever you choose to do with the cash.

As far as investments go, it is not something that is going to give you a great return and you are advised to seek the advice of a professional before using it as such. It may take many years before you have an appreciable amount saved in your account. That same money would, undoubtedly, perform better in just about any other investment vehicle.


Premiums for Whole Life insurance are usually quite expensive compared to what you would pay for Term Life. The good news is that you are accumulating money that is always yours, as opposed to a Term Life policy in which you may never get a cent.

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