Term Life Insurance vs. Whole Life Insurance

Term Life Insurance vs. Whole Life Insurance
Are You Covered?

Term life insurance is “pure” insurance. In contrast, permanent life insurance adds a cash value component that you can take advantage of over your lifetime. Term coverage only protects you for a limited number of years, while lifetime coverage protects life if you can keep up with your premium payments.

Why whole life insurance is a bad investment?

Policygenius reports that whole life insurance can cost six to ten times more than a comparable term policy. That dramatically increases the chances that you won’t be able to pay your premiums at some point in the future. If that happens, you may have no choice but to drop your coverage, leaving your loved ones vulnerable.

What happens to term life insurance at the end of the term?

You will no longer have life insurance coverage when you outlive your term policy, but you can switch to a permanent policy or purchase new term insurance.

What are the pros and cons of term life insurance?

Term Life Pros & ConsprosCons

Lower premiums when you are younger It is a temporary cover

Beneficiaries will receive larger death payments You must re-qualify at the end of the period

Can be converted to whole life insurance Difficult to qualify if there is a significant health problem


What is the disadvantage of term life insurance?

Disadvantages of Term Life Insurance

Premium payments for term life insurance increase after the initial guarantee period. For example, if you have a 10-year term policy, you can expect a significant increase in your premium after the tenth anniversary of the policy—prohibitive cost over time.

Should I collect whole life insurance?

Whole life insurance policies are the best option for some people, especially those who will always have dependents due to disabilities. But if you’re paying for an expensive policy that you don’t need, dropping it may be the best option, even if you have to pay fees and taxes.

What happens if I outlive my life insurance policy?

If you outlive your term life policy, you usually don’t get any money. … Return-on-premium (ROP) term life insurance pays you back in premiums. The downside is that it will pay more than a standard term life policy. If ROP interests you, compare policies with and without that rider to see if the extra cost is worth it.

When should you stop term life insurance?

Ultimately, you should keep your term life insurance for as long as you need the insurance: children in the home, a non-working spouse to support if you die, or pay a mortgage.

What happens at the end of a 20-year life insurance policy?

What happens to my premiums when the policy expires? Coverage will end at the end of your term, and your payments to the insurance company will be complete. If your term life insurance policy outlives, the money you’ve contributed will stay with the insurance company.

Can I cash in my term life insurance policy?

The cash value of a life insurance policy works like a savings or investment account and grows tax-deferred over the policy’s life. You can take out a loan against the cash value, redeem your policy for the cash, or use it to pay your premiums once you reach a certain amount.