Life Insurance Comparison: Term Insurance vs Whole Life Insurance?

Term Insurance? Whole Life Insurance? Now which one do I choose?

This is the ultimate question when you are planning to purchase life insurance.

First let's look at the differences between Term insurance vs Whole Life insurance.

Term Insurance:

Simply put term insurance is pure Life Insurance for a set number of years. You are protecting your life for a period of time. The monthly term insurance premium does not fluctuate during that period of time.

The term life insurance policy can be purchased in increments of one year to 30 years. Your life insurance quote will be giving you a quote of your set monthly premium.

The beneficiary is named on the policy and upon the death of the insured the set amount is paid out to the beneficiary.

Term Life Insurance policies cost less than Whole Life Policies.

Whole Life Insurance:

Whole Life Insurance combines Term Insurance and an investment together. The insured pays a monthly insurance premium for the rest of his/her life. It is life insurance for the entire life of the insured (plus an investment component).

Different from Term Insurance, with Whole Life Insurance you now have an investment component which could be in:

Bonds / Money-market / Stocks

The monthly Whole Life Insurance premium is also a set montly premium each month and generally more expensive than Term Insurance.

Other types of Whole Life insurance include:

• Traditional Whole Life Insurance
• Variable Life insurance
• Universal Life Insurance

A portion of the funds that you are paying on a Whole Life Insurance policy will go into an investment vehicle. There are a few investment vehicles to choose from with the insurer. You are able to "borrow" the money and pay it back with interest.

Life insurance premiums, whether term insurance or whole life insurance tend to increase much more dramatically after age 50. Keep in mind that Term Life insurance companies may not insure people over the age of 65.

So Term Insurance vs. Whole Life Insurance? Which one?

Term insurance is pure insurance like car insurance. It is much less expensive and with your savings you can put that money into any investment which you choose and control.

Whole Life Insurance is Life Insurance plus an investment component. The investment component is marketed as "forced savings" but it is savings within a limited number of investments under the life insurance company.

Our recommended strategy:

When getting your life insurance quotes you can calculate the difference between a term insurance policy and a whole life insurance policy. Decide on a term life insurance policy and invest the difference in any investment vehicle of your choosing whether it be in money market, bonds, mutual funds or stocks.

You'll have life insurance and full control of your money (you won't need to borrow it if it was a term life insurance policy).