Is whole life or term life insurance better?

Term vs Whole Life Insurance

A man with silver hair just signed up for life insurance When shopping for life insurance, most consumers agonize over the decision between whole and term life. Here are some hints to make the decision less painstaking.

The Expense

You probably already know that the premiums associated with permanent plans, including whole life, are more expensive than those of term policies. This is because, with permanent coverage, part of the premium 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 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 your financial goals. 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 grow your wealth on your own.

How Long You Keep the Policy

How long you intend to have your plan 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 coverage. However, if you plan to keep your policy for more than 20 years, you should shop for whole quotes. Keeping a whole 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 policies within the first decade.

An Investment Vehicle to Consider

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 policy solely for investment purposes. If you want to earn interest, you are better off doing so on your own (outside of a policy). Only a small portion of your 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 coverage and would also like a supplemental investment tool, whole life might make more sense.

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Find the best rates Coverage permanency and never-increasing premiums are just a few of the benefits whole life has to offer.