If you’re like most people, you don’t spend too much time thinking about death, or life insurance, but it is something that everyone should pause and consider once in awhile, especially if you are part of a family or group of people who rely on you either financially or for your other contributions on a daily basis. That is the purpose of life insurance - to enable those that you care about to continue on after you pass on to…other things.
Term Life
Term life policies are the simplest most straightforward type. Usually set for a certain period of time (5 years, 10 years, 20 years, etc.), this type of life insurance has the lowest premiums and pays a specified amount to your beneficiaries when you die. This type of policy simply allows your family to replace your contribution to the family (whether financial or otherwise) as well as take care of your final arrangements. Your premiums are set by the term you choose when signing up for the benefit and will not increase for the duration - though they may go up when the time comes to renew your policy for a new term.
Whole Life
Whole life insurance policies basically serve a dual purpose: They pay your beneficiary a set amount after your death as with term life insurance, however, whole life has the added benefit of building up a ‘cash value’ account at the same time. For this reason, premiums for whole life insurance are generally higher than just term life policies. This account is managed by the bank and with whole life policies you are usually free to cancel your policy at any time and receive the amount you paid into the tax deferred account back to you. Also with most whole life policies, sooner or later you will reach a point where you are completely “paid up” and no longer need to pay premiums (but are still covered for a death benefit).
So What’s the Bottom Line?
The Term life policy has its advantages in that you know your premiums will never increase, the premiums are generally very low, and the entire process is simple to understand. Whole life policies have an ‘added benefit’ of the cash account which is essentially tax-free savings up to a point. Also you know that after you’ve paid the increased premiums for a set time, they will go away. Whole life generally tends to be a “whole life” commitment to get the best benefit and value from it, while term life policies are for saving on your premiums and just being prepared for those sudden situations that may come up in anyone’s life. Whichever you choose, make sure you shop around for the best rate and policy that suits your needs.
Taken from : http://www.lifeinsurancerates.com/whole-life-or-term-life.html
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