Term Life Insurance Articles
Why To Choose Term Life Insurance Over Whole Life
2009-09-24
When you're considering life insurance policies, you'll have to choose between a term life insurance plan or a whole life insurance plan. The different types of plans are intended for different types of buyers, and carry different risks and benefits. They've each got their place, but for most healthy, middle-class people, term life insurance might be a better purchase right now than whole life insurance.
First, let's define the terms. Term life insurance is, a policy that will only cover you for a certain term. The term of your arrangement can vary from five years to 20 years and even beyond. However, when you sign up for this sort of coverage, beneficiaries will only collect on your policy if you die within that period. For that reason, term life insurance is sometimes seen as more of a gamble. Where there is the potential to get nothing back in a term life coverage policy, whole life insurance typically provides some way to get a portion of the money that you pay into a plan back after a certain period. They are similar to how an IRA works, except without the interest.
Life insurance companies will often promote whole life insurance as a form of retirement plan. But for most people, it makes far more sense to put money into a better retirement plan and purchase term life insurance with good coverage. If you're fairly young and healthy, term life insurance rates will be much less expensive, depending of course on the fine print of your policy and how much coverage you're buying. If you're looking into life insurance because you want to plan for the unexpected, term life insurance covers you while costing less than the whole life insurance policies that you might be able to get. So, from a strictly monetary standpoint, term life insurance could ultimately be a better deal.
You might argue that since it's impossible to collect on term life insurance if you outlive the term of the policy, whole life insurance seems safer. This may be true for some plans. However, many term policies allow a "conversion" towards the end of the term that lets the policyholder convert to a universal or a whole life plan from the same company for far less than he or she would normally pay. If you've gotten wealthier towards the end of the term, this will also be a great way to get a return on your "investment." It's important to remember that life insurance is more a type of insurance than an investment, but even so, term plans are a far cheaper and more reliable choice for many people.
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When you're considering life insurance policies, you'll have to choose between a term life insurance plan or a whole life insurance plan. The different types of plans are intended for different types of buyers, and carry different risks and benefits. They've each got their place, but for most healthy, middle-class people, term life insurance might be a better purchase right now than whole life insurance.
First, let's define the terms. Term life insurance is, a policy that will only cover you for a certain term. The term of your arrangement can vary from five years to 20 years and even beyond. However, when you sign up for this sort of coverage, beneficiaries will only collect on your policy if you die within that period. For that reason, term life insurance is sometimes seen as more of a gamble. Where there is the potential to get nothing back in a term life coverage policy, whole life insurance typically provides some way to get a portion of the money that you pay into a plan back after a certain period. They are similar to how an IRA works, except without the interest.
Life insurance companies will often promote whole life insurance as a form of retirement plan. But for most people, it makes far more sense to put money into a better retirement plan and purchase term life insurance with good coverage. If you're fairly young and healthy, term life insurance rates will be much less expensive, depending of course on the fine print of your policy and how much coverage you're buying. If you're looking into life insurance because you want to plan for the unexpected, term life insurance covers you while costing less than the whole life insurance policies that you might be able to get. So, from a strictly monetary standpoint, term life insurance could ultimately be a better deal.
You might argue that since it's impossible to collect on term life insurance if you outlive the term of the policy, whole life insurance seems safer. This may be true for some plans. However, many term policies allow a "conversion" towards the end of the term that lets the policyholder convert to a universal or a whole life plan from the same company for far less than he or she would normally pay. If you've gotten wealthier towards the end of the term, this will also be a great way to get a return on your "investment." It's important to remember that life insurance is more a type of insurance than an investment, but even so, term plans are a far cheaper and more reliable choice for many people.
