Term Life Insurance Vs Whole Life Insurance " What To Buy

Various forms of whole life insurance have been around for decades upon decades. Although certain changes have been made over time, especially to the savings and investment portion of the policy, it's still basically the same concept. Term insurance, on the other hand, is new to the game and came on the scene as a welcome relief in the 1970s. Before buying anything, however, these are things you need to know about Term Life Insurance vs Whole Life Insurance.

Term insurance is the more affordable because you are only buying insurance for a specific term, or period of time. You are also only paying for the ultimate death benefit. Whole life, on the other hand, is paid for and you are covered for your "whole life". This is definitely not a good investment in a situation where you might buy a policy when you get married in your twenties, and continuing paying until your death at perhaps 94.

Term policies are very affordable as compared to whole life policies because with term, you are only paying for a death – or burial – benefit. Unlike whole life or cash value, you are not using your insurance policy as a form of savings or investment portfolio. A typical term policy is about 65% cheaper than the same policy purchased as whole life.

With term, however, if you survive the term of the policy, you don't get any refunds as some people think. You pay your premiums, and both you and the insurance company are gambling that you don't die. With whole life, your policy covers you for of course you whole life. The drawback is that you must keep paying premiums for the rest of your life, and if you took out your policy at an early age, you could actually be paying more than you should for a simple death benefit.

Now, let's say you want to check out whole life policies. For $250,000 coverage for each of you, you'll first need to buy two separate policies, doubling your expense. Your premiums each month will be at least $500 for both policies. If you have kids, again, a separate policy for each one.

With whole life, one reason it's so expensive is because it's set up to act as a savings account as well. When you buy your policy you are asked to choose funds from the insurance carrier's limited selection, in which to invest. Your agent tells you your investment will see a 15% return each year, but what he doesn't tell you is that you only see a fraction of this – about 3%. The insurance company keeps the rest!

When it comes to insurance and planning on providing for your family if something happens to you, it's never a good idea to mix insurance coverage with investments. In the case of whole life, what your agent doesn't make clear to you when you buy the policy is that when you die, your family only gets the actual death benefit – the face value of the policy. They don't get your investments! The insurance company keeps that money! In effect, you can only benefit from any of that while you're alive.

If you happen to borrow any of this money, by the way, your death benefit is decreased until you pay yourself back. With interest!

You can use the term life insurance calculator to find the best level of insurance fast! When comparing term life insurance vs whole life insurance, a person will be able to see the benefits and advantages of each type of insurance instantly!