| Whole Life Vs Term Life Insurance: Determine Which Is Best |
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| Written by Eddie Lamb |
| Friday, 15 January 2010 11:42 |
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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.
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. When you buy term life, you are buying life insurance and nothing else. It is just a basic life insurance policy with no extras. Term life is not an investment. It has no cash value at all, so if you pay your premiums for years you have nothing to show for it except that many companies will lock your rate for a certain number of years from when you buy the policy, or at least limit the amount of increase. 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. It's easy to be led to think that a whole life policy must be a better deal because you are getting something extra. However, that is not necessarily the case. It's true that the term life doesn't have a cash value, but the premiums are usually much lower as well. You have to take the difference in price into consideration when deciding which life insurance policy is the better value. You also have to consider whether you are really getting anything extra at all by purchasing whole life. You see, even though the insurance salesman makes it sound like you are buying something extra by getting a whole life policy with a cash value, that is just not the case. The way whole life works is this: if you die while insured, your beneficiary gets the insurance but not the cash value. If you cash it out, you get the cash value but not the insurance. So what were you paying extra for? If you buy a term life insurance policy instead, you can take the amount of money you are saving on the insurance and invest it into a mutual fund. That way, you really do have both an investment and an insurance policy. The insurance will cover you if you die, and chances are the mutual fund will be worth more than the cash value of the whole insurance policy if you don't. Plus, if you die while you are still insured, your beneficiary will get both the life insurance and the mutual fund. Before you purchase any insurance policy, you should do the math yourself and determine which type of life insurance policy is best. Don't just take my word for it, or the salesman's either. If you evaluate both policies carefully, you will probably find that the term life insurance provides the best possible value for the money. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Life insurance can be complicated, especially if you don't know the difference between insurance types on the market. The types you'll see most frequently are term and whole life, let's compare whole life vs term life insurance, to ensure you get the most competitive term life insurance . |