Term Life Insurance vs Whole Life Insurance

If you don’t own a life insurance policy, you should get one – now! These policies can help provide for your family long after you have gone. And if you are currently looking to buy a life insurance policy, the usual dilemma develops as to what type of policy you should buy, term or whole life. Most people don’t have a clue as to how these policies are different and typically go for whole life. The insurance agents like this as well considering these types of policies get the agents a larger commission from the insurance company. But are you sure you want to go with whole life? What you should do is compare the two so you can then make an informed term life insurance vs. whole life insurance decision and decide which is right for you.

 The whole life insurance policy is an option for some consumers. This type of insurance policy allows consumers to place their monthly premiums into a plan. Then, at a date in the future, these premiums can be withdrawn and cashed out. This might be attractive as a security if you would need an asset in which to use to apply for a loan. Because of this, it is also sometimes called a return of premium life insurance.

The negative side of whole life insurance policies is that only a portion of the monthly payment is deemed the “premium”. And it is only this amount that you can cash out. The agent that sells you this policy gets over 75% of the money you pay each month for as long as the first year of the policy. The % declines each year that the policy remains in effect. What this means is that the bulk of the money you pay out to the insurance company is not available to be used to cash out. The death benefit is still there, but the cash out option is not what it is marketed to be.

 Let us define term life insurance. Term life insurance provides where whole life insurance fails. What this means is that you pay premiums for a set number of years (15, 20, 30 or more years). You still get the death benefit that you have paid for, but you don’t have to worry about a cash out option (because there isn’t one). Besides, I have shown how this cash out option really is a bad deal anyway. If you do not die during the term, you simply buy a new term life insurance policy. Naturally, the younger you are, the lower your rates will be. But a typical 40 year old man can get over $500,000 in term life insurance for as little as $40 a month. And group term life insurance policies or joint term life insurance can lower the rates even more. But insurance agents don’t push term life insurance as vigorously as they do whole life because they earn a lower commission on them.

When making the whole life vs term life decision, you will find both types of policies either at your local insurance agent or via getting a policy online. With both policies, when you die your beneficiaries will receive the benefit with the main difference is that whole life can be used as an asset to borrow against.

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 Shop around for the best policy and the best deal. Sometimes the best deals can be found at your local insurance office. However, many times the low cost term life insurance and low cost whole life insurance policies can be found online.