Whole Life Vs Term Life Insurance: Which Is The Best Value?

Comparing life insurance policies can be confusing, especially if you don't know the difference between the different types of life insurance available. The two kinds you will see most often are term life and whole life, so let's compare whole life vs term life insurance.

The main difference between the two different types of life insurance is that a term life insurance policy is just life insurance. It does not build up a cash value like a whole life policy does. If you die, your beneficiary gets the money; if you don't, well at least you were covered by the policy in case something had happened to you.

A whole life policy is another matter. You see, if you keep paying the monthly premiums on a whole life policy, after awhile you will be able to cash it out if you choose to do so. You usually have to own the policy for a certain amount of time before it accumulates any cash value. After that, the policy continues to increase in value over time. It could amass a value of thousands of dollars before you reach retirement age, depending on when you start the policy.

If you think whole life insurance is a better deal just because it has a cash value, you are sadly mistaken. In fact, it is term life insurance that is the better deal. The main reason is that when you buy whole life insurance, you are paying for both the insurance and the investment, but you really only get one or the other.

Take a little time to compare the prices of term life and whole life policies and you will see what I mean. The whole life insurance is significantly more expensive. Most people look at that and think that of course it is more expensive because you are getting more – cash value in addition to the life insurance.

However, if you read the fine print you will find that if you cash out the whole life policy, you will no longer be able to collect on the insurance and if you die and someone collects the insurance, they cannot get the cash value. In other words, you are paying extra to get two things but you really only get one or the other.

Now consider what happens if you buy a term life insurance policy. You save money over the cost of the whole life, so why not take the money you saved and use it to purchase an investment, such as a mutual fund. You still have the life insurance coverage, but now you have an investment too, and since they are separate, your beneficiary will get both the insurance and the proceeds of the investment when you die.

When comparing a term life policy to a whole life policy, you need to look at the possible outcomes for each to decide which one is the better deal. I can almost guarantee you that the term insurance policy will come out on top every time.

Life insurance can be confusing, especially if you don't know the diffs between insurance types available. The types you'll see most often are term and whole life, let's compare whole life vs term life insurance, to ensure you get the most competitive term life insurance .