Term vs Whole Life versus Your Wallet:
Which is the Best Life Insurance Policy for You?

The average young family who seeks life insurance hears a proposal for Term Life before he or she hears anything else. The availability of Term creates the impression of quality by virtue of commonality. However, the impression can be misleading.
get a life quote >>

Companies push cheap Term insurance because it is the best deal for the company. A very small percentage of Term insurance policies are ever paid because people usually outlive the term. Once the term expires, most people cannot afford to continue or renew it. Thus, 20 years of premium went straight into the company's proverbial pocket. Of course, the same is true with your home owner's insurance and your car insurance.

That does not, however make Term Life a bad choice. For some clients, Term is exactly what is needed. The key is in understanding the difference between Term and whole life and thereby deciding what will best fit YOUR need, not what will be the quickest sale or lowest risk for a company.

The primary difference when comparing Term Life vs Whole Life is that Term is for a set time period while whole life is in effect until the day you die, cash it in, or terminate it through some mechanism of your own choice.

Within the two broad categories, you have additional choices. Most Term Life is level term/level premium. In other words, both your face value and premium remain the same for the duration of the time period. "Annually Renewable Term Life" is a Term policy that gives you a level face value but with a periodically increasing premium. Typically, this variation will start at a price that seems almost ridiculoussuch as $1.00 for your first month. The increases are moderate for the first two or three periods, but increase more steeply as you age. Usually the policy terminates altogether at age 85.

"Decreasing Term" give you a level premium for a period of time, but the face value decreases each year. This type is often used as mortgage insurance, but is not suitable as regular life insurance.

Whole life also has some variations. You could purchase "modified" whole life, which could mean that your policy never expires but that you have periodic increases in premium. "Variable Life," which is seldom sold today, is a whole life policy with the cash value invested in variable products. Finally, a cross between whole life and Term life is Universal Life which gives you the protection of Whole life at a cost that is more than Term but less than whole life. If a Universal life is not funded properly, it will work like a term with the policy lapsing when the cash accumulation is exhausted.

Term and Whole Life policies both have their advantages and disadvantages. As a client, it is important to know what you want your life insurance to do before making the purchase. There is nothing more frustrating than to put a lot of money into a life insurance policy only to find out that you need to start over with something more appropriate to your needs. The following table will help you determine what type of policy is best for you.
get a life quote >>