Life insurance: term or whole life? How about a middle road?

Life insurance is confusing and complicated, but it doesn’t have to be! Essentially there are two main types of life insurance: Term and Whole Life. What’s the difference?

Term Life Insurance:

  • strictly insurance
  • is only for a limited time (short term: ranges from 10-30 years)
  • cheaper premium

Whole Life Insurance:

  • insurance that promises profit that can be used to cover your premium and even add to the value of your death benefit
  • lasts your entire life
  • more expensive premium

Here are the cons for each:

Term Life Insurance:

  • is short term
  • there is no investment (the value does not grow over time)

Whole Life Insurance:

  • is expensive (will be able to afford less death benefits)
  • has no guarantee that the promised profit will grow
  • even if there are profits, it will be low as the insurance company will be charging fees

For term you are essentially just buying insurance, all the money that you have to pay monthly (or yearly) for this plan will be gone, but for whole life the money you pay is used to invest in mutual funds that hopefully will profit and be able to cover the monthly premium Continue reading