Term Life Insurance Or Whole Life Insurance?

Get Fabric Both have pros. But talking to an agent without knowing which is right for you can be an easy way to end up with a product that isn’t suitable to help you meet your needs. For many parents, the choice is easy.

Financial decisions are tough even for the most financially savvy among us.

Things only get dicier when you become a parent. Perhaps you were just getting your arms around your own financial picture when your first child arrived. Suddenly your needs are changing. You want to make sure the people depending on you are taken care of financially—even if something happens to you—but you have competing priorities that always seem to get in the way of figuring it out for yourself.

Instead, you wind up talking to an insurance agent. and maybe even let them steer your thinking about whether a term life or whole life plan makes more sense for you.

This is bad. Don’t fall into the trap. Do your homework and learn about the pros and cons of both. Start by reading the info below to help you make the right call for you.

What is term life insurance?

Term life insurance pays a lump sum to your beneficiary if you pass away during the period of coverage (the “term”). It is often called “pure life insurance” because there are no bells or whistles, just insurance.

Typically, a new family’s need for life insurance is the highest for the first 20 years: the time it takes for your kids to be off on their own. And by that time, if you own a home, you’ll probably have paid off enough of your mortgage so that it is a more manageable financial risk. For these reasons, the most popular time period for term life policies is 20 years.

What is whole life insurance?

Unlike term life policies, whole life policies (also known as “permanent insurance”) cover policyholders for a lifetime.

In addition to paying a death benefit to your beneficiaries when you pass away, whole life policies include an investment component that can build cash value over time. This accumulated cash value can be borrowed against or withdrawn before you die.

Because of the complexity of whole life policies, buyers often work with an insurance agent to select and maintain a policy. Whole life policies are typically more expensive but, depending on your individual needs, they can be useful in some cases.

What are the important features of term life and whole life?

Term life insurance

  • Easy and affordable life insurance.
  • Covers a specific time period, typically 20 years.
  • Pays benefits only if you pass away during the term, while the policy is in force.
  • Can be a good choice for people worried about what would happen to those depending on them for a specific number of years, as it simply provides insurance for the policyholder and offers a death benefit.

Whole life insurance

  • A bit more involved to purchase, requires a dedicated professional to guide you.
  • Covers you for life; providing death benefits as well as a cash value accumulation that builds during the life of the policy.
  • Cash value is based on the investment component. A portion of this amount can be borrowed against or withdrawn.
  • Can be a good choice for estate planning - especially if you’ve maxed out all other tax-advantaged types of accounts. Whole life offers the possibility of both a living benefit as well as a death benefit.

How much does each plan cost?

Nailing down costs without knowing details about your specific age, gender, and health is difficult. Use the numbers below as a guide.

Male, Age 30

  • Policy amount $100,000:
    Monthly premium for whole life $90
    Monthly premium for term life $12
  • Policy amount $250,000:
    Monthly premium for whole life $198
    Monthly premium for term life $17
  • Policy amount $500,000:
    Monthly premium for whole life $389
    Monthly premium for term life $25

Female, Age 30

  • Policy amount $100,000:
    Monthly premium for whole life $90
    Monthly premium for term life $11
  • Policy amount $250,000:
    Monthly premium for whole life $176
    Monthly premium for term life $16
  • Policy amount $500,000:
    Monthly premium for whole life $345
    Monthly premium for term life $22

Male, Age 40

  • Policy amount $100,000:
    Monthly premium for whole life $129
    Monthly premium for term life $17
  • Policy amount $250,000:
    Monthly premium for whole life $289
    Monthly premium for term life $25
  • Policy amount $500,000:
    Monthly premium for whole life $575
    Monthly premium for term life $43

Female, Age 40

  • Policy amount $100,000:
    Monthly premium for whole life $110
    Monthly premium for term life $15
  • Policy amount $250,000:
    Monthly premium for whole life $250
    Monthly premium for term life $23
  • Policy amount $500,000:
    Monthly premium for whole life $483
    Monthly premium for term life $34

Methodology: Term life quotes represent Fabric Premium prices rounded to the nearest dollar. For whole life, we averaged the three lowest quotes available in each category for healthy men and women from a comparison website.

Which is right for me?

According to the experts quoted in The New York Times, the simplest solution — term insurance — is often the best. It’s just the sales agents that are often eager to push more complex policies, with “large and often hidden fees, and complex riders laden with mumbo jumbo.”

Fabric makes it easy, agent-free, fast and affordable to get the coverage you want. Check our prices.

Get Fabric

Comments