Is Term Life Insurance Better than Whole Life Insurance?
However, it’s worthwhile to note that you likely need much less whole life insurance than term life insurance. For example, you typically wouldn’t buy enough whole life insurance to cover the cost of your mortgage because your mortgage won’t last your entire life, usually only 10-30 years.
Whole life insurance, if necessary, is best purchased as a supplement to term life insurance. For example, you could get a 30-year term policy to cover your mortgage and family needs and then supplement it with a small whole life policy that will cover end-of-life expenses, such as your funeral costs or medical bills, and leave behind an inheritance.
Do you have a child with special needs or a disability?
If you have dependents who will rely on you long-term, then a whole life policy may be better in this case. A term policy can still be useful to cover big ticket items such as your mortgage, but a whole life policy can help ensure your loved ones will always be financially protected even after you’re gone.
Are you not a disciplined saver?
You may have heard the saying “Buy term and invest the difference.”
Because term insurance is so affordable, it makes sense to own term and put the money you would have spent on a whole life policy into investments. However, this really only works if you actually invest that difference.
No judgment, but if you’re the type to have extra funds at the end of each month and end up just letting it sit in a checking account or spend it on something you don’t need, then you might want to consider a whole life policy.
A whole life policy will not only ensure your beneficiaries will have the necessary funds for your final expenses, but this policy also builds a cash value that you can borrow or withdraw from should you need it (however, there are caveats to this such as paying interest.)
» Learn more: The Differences Between Term and Whole Life Insurance
Should I Buy Term or Whole Life?
Whether you buy term, whole, or a little of both is ultimately up to you and it depends on your lifestyle and financial situation.
Again, in the majority of situations, a term life insurance policy is going to be your best option. It’s affordable, you have multiple term length options to choose from, and you can customize a policy with a rider or two if you so choose.
One of the most important riders is a term conversion rider. Most term policies include this for free.
A term conversion rider allows you to convert all or a portion of your term policy into a permanent policy. So, if you decide later on that you do need some life insurance coverage for your entire life, you have access to permanent coverage via your term policy. No need to reapply or prove you’re still insurable.
Term Life Insurance versus Whole Life Insurance
Term Life
Lasts a certain length of time
Pays death benefit only if you die within the term
Affordable
Most can convert into a permanent policy later on
Whole Life
Lasts forever
Pays a death benefit no matter when you die
Accumulates cash value
More expensive
Not sure how much life insurance coverage you need for your particular situation? Give our life insurance needs calculator a whirl. Answer a few questions and it gives you a good estimate on how much term life insurance coverage you should buy.
Remember, if you ever have any questions or would like to discuss your life insurance options with a real person – we’re here to help. Contact us at any time.
» Compare: Term life insurance quotes
