Term Versus Whole Life Insurance

The question of whether to purchase term life insurance or whole life insurance has plagued almost anyone who’s ever shopped for life insurance quotes. An insurance quote can tell you a lot, but what an insurance quote won’t tell you is which type of policy is right for you.

The difference between term and whole life insurance lies within the amount of coverage. As the names suggest, term policies range from one to 30 years in length and are paid only if the policyholder dies within that period. Most people buy term life insurance because it is less expensive.

Whole life insurance (sometimes called permanent insurance), on the other hand, provides a death benefit no matter when the policyholder passes away and also comes with an investment component. Not surprisingly, the investment component makes this type of life insurance policy more expensive.

On the surface, whole life insurance, with its investment component, may seem like the better deal in the long-term, but bear in mind that most policies don’t start to accrue cash value until after the 10th year or so, making the investment prospects slim until then. If you plan to keep the policy for several decades, whole life insurance may be the better bet. However, another option is to buy a term policy and invest the difference.

After you’ve gathered free insurance quotes, consult with a financial planner who can calculate the return on investment for the policy that you are considering. In the end, it comes down to your specific needs and health.