What is the difference in whole life insurance and term life insurance. Which is best?

Answer 1

It is completely obvious that the previous person works for Primamerica which only sells a TERM product. The person that said you should listen to Suzie Orman is an IDIOT. The recommendations that Suzie makes are for the general public, But you need to talk to an adviser to find out which Life Insurance product is the BEST FOR YOU. There are professionals out there that will sit with you and find out how much coverage is needed and why that is important to you.

There is a good chance that you will need life insurance in 30 years if you save correctly. Have you ever heard of tax-free withdrawal of cash value? Have you ever heard of supplementing cash value in a Permanent policy to pay income tax on your retirement accounts? Have you every heard of ESTATE TAXES? Both Term and Permanent products are good and will help you accomplish the objectives that are important to you. Most successful people own a combination of both. Be careful when buying Universal life that you fund it properly so that it does not dissolve with its "Flexible Payments". Go see a professional. (Northwestern Mutual, New York Life, Mass Mutual)

Answer 2

By definition:

WHOLE LIFE
It is a life insurance policy that comes with a savings plan attached to it. Because of the savings plan, such policies are always expensive and coverage amount is rarely over $125,000. People considering whole life should know that the interest rate of return on savings is very low. If they wish to use this savings they will have to borrow it and pay it back with interest. During the first three years of the policy, no savings are accumulated. If policy owner was to die, the beneficiary will only get the face amount LESS any outstanding loans and premiums unpaid. All savings in the plan will be kept by the insurance company.

TERM
Term insurance is what is known as "pure insurance" such as car insurance. Term offers the maximum protection available for very low premium. People considering Term know they do not need life insurance forever because as they get older, they have less financial obligations and should be thinking about saving for retirement. With Term insurance, you are able to get coverage and be able to invest your money. With Whole Life, you are paying for coverage and savings and you really don't know how much of your premium is going into each. It is strong advised that people buying Term should invest the difference. People should get at least a 20 year Term and at most, a 30 year term.

Personally, I own Term insurance and invest the difference. I pay about $25/month for $250,000 coverage on a 20 year term. Each month, I also put away some money into my Roth IRA. I'm hoping that by the end of the 20 year term, that I have accumulated enough money in my IRA and that I don't need life insurance anymore (or not as much coverage).

Answer 3

Whole life, is just that: Whole Life, you pay premiums to age 100 if you live that long. Term life, is just that: For a term, 5, 10 15, 20 years etc. Whole life is very expensive and builds cash value, (that you can borrow from), which is stupid, that's like having money at your bank, and you walk in one day to get it out, and then find out you have to borrow it? Give me a break, it's your money. Whole Life is a rip off. Term insurance on the other hand is very cheap. So get a term policy, for however long you think you will need it, take the money you save by buying the Term insurance, and put it in a savings account, you'll be way better off.

Answer 4

Term Life Insurance is basically "renting" life insurance and you only recieve a benefit from it upon death.

Whole Life Insurance actually accrues and grows and maintains a cash value. You can benefit from it two ways, by death you receive the policy amount, or if you live, you receive the cash value eventually and in the meantime you can borrow against it.

It is therefore logical to conclude that Term Life is cheaper and is the most popular choice. Whole Life Insurance is much more expensive and not as popular because if you wanted to make money, you can put the same money into an IRA or some other fund and instead purchase term for the Life Insurance coverage.

Answer 5

The basic difference between term and whole life insurance is this: A term policy is life coverage only. On the death of the insured it pays the face amount of the policy to the named beneficiary. You can buy term for periods of one year to 30 years. Whole life insurance, on the other hand, combines a term policy with an investment component. The investment could be in bonds and money-market instruments or stocks. The policy builds cash value that you can borrow against. The three most common types of whole life insurance are traditional whole life policies, universal and variable. With both whole life and term, you can lock in the same monthly payment over the life of the policy.

Answer 6

Whole life builds a cash surrender value and lasts just that-your whole life. Term is cheaper and builds no cash value and lasts for a term, then there is no longer any life insurance left. It is usually the pick of young people and young parents because it is cheaper. Depending on what you are needing it for, both are good products. If you outlive the term policy, you are out the money, though. Generally, if you die during payment on a whole life policy, the entire face value is paid out upon death. Also, if you need to borrow against the cumulative cash value, you can do that, but it decreases the face value of the policy. Talk to an insurance agent to get more facts.

Answer 7

The description in the previous answers covers the basics. Some insurance companies offer "Secondary Guarantee Universal Life" policies which will pay a death benefit regardless of the cash value in the policy as long as the premiums are paid. The premiums on these policies are often lower than on true Whole Life policies.

As to which is better, you would have to post ALL of your personal financial information here to make that assessment (age, health, income, assets, debts etc). Since I doubt if you want to do that, go talk to a licensed insurance agent or financial planner. Expect to pay a fee. Search for one that listens to your goals, needs and wants. That professional should ask about your financial information. If he/she does not, find someone else.

Good Luck

Answer 8

Choosing between Term Life and Whole Life is a complex financial decision. It will have a great impact on your and your family finances for the entire life.
99.5% of Term Insurance ends without paying the benefit. The insured have to die for the benefits to be paid. Most people do not die before age 65. By age 65 the Term Insurance becomes very expensive and most people cancel it. It seams inexpensive unless you perform true financial analysis taking to consideration the premium plus lost opportunity cost plus lost of the death benefit. It is prudent to use it for a shot period of time.
Whole life has a lot of living benefit. The insured does not have to die in order to enjoy these benefits. Just to list a few: tax free accumulation of money, potential tax free distribution of income, protection against creditors, it is guaranteed to grow, self completion in the event of disability, provides access to money at any time, enhances retirement income, premium never increases.

Answer 9

Term life is usually set up for a certain term 10-20 yrs, you pay a set premium for the length of the term. There are different kinds of whole life type ins, but usually it accumulates a cash value that you can withdrawal. Whole life premiums are a lot higher, and if you do the math and invest what you save with term ins. you'll be way better off. Whole Life can be a rip off in my mind.

Answer 10

by far term is better. Pure insurance is the only i would use. whole-life and it's cash value myth is being uncovered everyday, even by people on TV, just go to this website with Suze Orman

http://www.suzeorman.com/
She's on cnbc, she knows what she's talking about

Suze says:

I HATE WHOLE LIFE INSURANCE
I HATE UNIVERSAL LIFE INSURANCE
I HATE VARIABLE LIFE INSURANCE
THE ONLY TYPE I LIKE – FOR THE PURPOSES FOR INSURING YOUR LIFE – IS TERM INSURANCE!
If you are smart with the money you have today and you get rid of your mortgages, car loans and credit card debt and put money into retirement plans you don’t need insurance 30 years from now to protect your family when you die.