Why Should I Buy Term Life Over Whole Life?

Understanding why term life insurance is a wiser move than purchasing whole life insurance, means understanding the difference between the two. Whole life insurance is purchased and billed for a set amount of time. After you've paid off your policy, it stays in effect for the rest of your life or to age 100, in most cases. The payments can be higher than term life, however there's investment value and your policy continues reflecting that investment.

Term life insurance is a policy you choose for a specific period, over which time you will make the same premium payment regardless of age or health, providing you make no changes to that policy. In the event of your death, your term life insurance policy pays your beneficiaries the amount declared on your policy, but does not include a policy cash value. Should your term limit be reached prior to your demise, your policy would expire.

Making Sense of It All

Buying term life instead of whole life insurance makes much more sense as your need for life insurance waxes and wanes. In the beginning, perhaps when you land your first big job, you'll make the responsible move and secure a policy. At a young age, say around 30, you should be able to get a term life insurance policy for the cost of a pizza, or a couple of lattes. You can secure a pretty high payout and lock that in for anywhere from 1 to 30 years.

As you get older, your responsibilities increase. You may have a family and mortgage. Your plans include helping your children along the way. Orthodontics and other expenses give way to college tuition and possibly the cost of a wedding. Your family's home and any debts you may incur become a big part of your responsibilities. Should your untimely death leave your loved ones without your income to help defray some of these costs, the impact would be all the more devastating.

By purchasing term life insurance, rest assured that your spouse and children won't bear the brunt of poor financial planning. If you have any other dependants who count on you for financial support, such as aging parents or a domestic partner, you should honor your commitment to them as well. Term life insurance allows you to do so, without interruption or lapse in your coverage, for a minimal premium payment.

Managing Your Future

Term life insurance is a better option for you if you're looking to satisfy a debt with your benefit payout. It's simple and easy to understand. Term life insurance is the most basic life insurance option you'll find. That's not to say that your payout will be minimal. You control the amount of payout by choosing how much insurance to purchase.

Whole life, and many of the other available variations, charge a higher premium and then use a portion of that premium to invest for a return to be applied to your payout amount. You won't have any say as to how your investments are carried out, and many experts agree that consumers should consider securing a term life policy and then investing their own money in other ways, such as money markets, IRA and certificates of deposit. That way you'll have more control over how your money is invested.

Opting to buy term life insurance over whole life is a personal choice. Both offer you the benefit of coverage for your loved ones in the event of your death. Even though the cost of both life insurance options go up with age, your term life policy will still cost far less while providing excellent payout amounts.

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