When you have a family, you must protect it and them in the event something happens to you. you need to have a death benefit of 10 to 12 times your salary to give your family the proper protection in the event of your death.
So for example, if you make $50k per year, you need 500-600k of life insurance for your family. The simplest, most efficient and cheapest way to achieve this is with a simple death benefit called term insurance.
Pros and cons
For most people, the negatives of whole life insurance outweigh the positives. But a whole life policy may be a better fit if you need lifetime coverage or another way to invest outside traditional financial services.
Term life insurance
Pros
- Affordable premiums
- Can cancel the policy without any penalty
- No hidden fees, exclusions, or investment risk
Cons
- Coverage expires, so you have to buy a new policy if you still need insurance later
Whole life insurance
Pros
- Can be useful for estate planning
- value acts as a forced savings vehicle
- Coverage doesn’t expire
Cons
- Higher premiums are difficult to afford long-term
- Other investments offer higher interest rates
- Penalties apply if you cancel coverage
Term life vs. whole life: Make a choice
Whether you need a term life or whole life policy depends on your financial needs.
- Term life is right for you if: You want an AFFORDABLE affordable way to leave a death benefit behind to financially support your loved ones and you expect to self-insure in the future
- Whole life is right for you if: Your estate will be subject to an estate tax, you want to build cash value, or you have long-term dependents
Term life insurance is the right life insurance policy in most cases because it offers the same amount of death benefit as whole life insurance for a fraction of the price. If you’re still unsure, a licensed life insurance expert or financial planner can help you compare the best companies and decide which type of policy is right for you.
Term vs. whole life insurance FAQs
What’s the difference between term life and whole life?
Term life offers affordable coverage for a set period, usually 10-30 years. Whole life is a lot costlier because it lasts your entire life and has an investment-like component.
Is term life or whole life better?
Term life is the best option for more people due to its affordability. However, whole life is a good option for people who have a high net worth or long-term dependents.
Whole life is not cost effective and is a forced savings plan that does not work for that purpose and you could lose everything. it is also the type of policy insurance agents make the most commission on. when planning for your families’ protection, always use term insurance and be sure to get a renewable policy. your goal over time should be to be able to self-fund all this and not actually need the term but until you reach a point in your journey where that is possible, you need term insurance as part of your plan for your family.
Imagine your family struggling to pay off a mortgage and car payments and more with little or no income. term life will help greatly to avoid this. a term life insurance policy delivers affordable protection and peace of mind.
Types of term life insurance
While traditional term life insurance, also called level term life insurance, is the most straightforward type of life insurance and the right one for most people, there are some variations of term life that might be a better fit for your needs. These include:
- No-medical-exam term life insurance: Allows you to skip the life insurance medical exam and still receive coverage
- Annual renewable term life insurance: Renews on a year-by-year basis; premiums usually start lower than a standard term life policy and increase each year
- Decreasing term life insurance: Premiums remain the same, but the benefit amount decreases each year
- Group term life insurance: A type of annual renewable term insurance offered through the workplace, but not always portable from employer to employer
- Mortgage protection insurance: A type of decreasing term insurance where the beneficiary is your mortgage provider and the term and benefit amount are tied to your mortgage length
- Return of premium term life insurance: Allows you to get your premium payments back at the end of the term
- Increasing term life insurance: Can have set or varying premiums, depending on the insurer; the death benefit amount grows over the life of the policy.
