What's Best: Whole Life or Term Life
When shopping for life insurance, most consumers agonize over the decision between whole life and term life. Here are some hints to make the decision less painstaking.
The Expense
You probably already know that permanent life insurance premiums, including whole life insurance quotes, are more expensive than those of term policies. This is because, with permanent life insurance, part of the premiums is applied to a savings program. Consequently, whole life policies will build cash value on top of the death benefit, whereas term policies have no value once they expire. Some financial experts advise consumers to purchase term life and then invest the difference. This might provide higher returns, but there are also drawbacks. For one, you may not have the discipline to devote all of your premium savings to investments. With whole life, you are essentially compelled to save your money because it's taken out of your premiums. Secondly, the investments you make with the money you save have no guarantees. With whole life policies, on the other hand, most of them offer a minimum guaranteed cash value amount. Basically, the choice comes down to how comfortable you are with risk and how likely you are to save and invest on your own.
How Long You Keep the Policy
How long you intend to have your life insurance policy has a profound impact on which type of coverage is right for you. If you plan to keep your insurance policy for fewer than 10 years, then you should shop for term life insurance. However, if you plan to keep your policy for more than 20 years, you should shop for whole life insurance quotes. Keeping a whole life policy over a long period of time will allow the cash value to accumulate to an appreciable level and will also allow you to realize the premium savings you wouldn't have with a term policy. For the gray area in between 10-20 years, you will have to make other considerations. Bear in mind that most consumers cancel their life insurance policies within the first decade.
Life Insurance as an Investment Vehicle
Some consumers seek out whole life insurance quotes because they see that type of policy as an investment vehicle, first and foremost. However, consumers should never choose a life insurance policy solely for investment purposes. If you want to invest, you are better off doing so on your own. Only a small portion of your whole life premiums will go toward investment purposes; the rest will be applied toward the death benefit and sales commissions. On the other hand, if you need life insurance and would also like a supplemental investment tool, whole life might make more sense.
