Term vs Whole Life

Consumers should consider four main items when thinking about purchasing term or whole life insurance:

How long will you need the insurance?
Term life coverage can be purchased for periods of one up to 30 years. Purchasers should evaluate the need for insurance after the majority of debts, like a home, are paid.

Whole life, on the other hand, provides life insurance coverage an entire lifetime.  Senior years are the ones when life insurance is most likely to be needed.  It is much more expensive to purchase term insurance for older adults.

How much insurance is needed?
Term life should be used to protect against financial considerations on a time schedule, like a mortgage or paycheck.  When the mortgage is settled or the worker retired, coverage may not be needed. Term life should be used to protect assets like those.

Whole life should be bought to benefit upon death regardless of age.  For example, to pay estate taxes. Whole can be used in the case of few assets and to create an estate or pay for a burial. It could also be used for the affluent to pay estate taxes, or to compensate for a pension that will not fully pay a spouse.

When can higher premiums be paid?
Term life can save premium costs or allow the purchase of a larger death benefit because the buyer is only paying the cost of insurance and not investing in a cash value. Whole life has more expensive premiums initially than term.  However, after a long insurance period, the difference in premiums between term and whole may be about the same.  This is true when older buyers look to renew new term insurance.

When will you die?
Unfortunately, term life would be perfect if the purchaser dies young. Serioulsy, it may be a good idea to buy term if family members tend to have a shorter longevity. Remember that term life insurance companies usually won’t provide coverage past age 75.

Whole life provides coverage for an entire lifetime and there is assurance in knowing coverage is provided as long as premiums are paid.  If your familiy tends live long, congratulations, and you may need whole life.