Some people feel that when they buy car or home insurance they are just throwing their hard earned money away, especially if they’ve never had a claim on either one of those policies. Life insurance on the other hand provides a return of all your money whether you live or die. So why do you think less than half of the U.S. population buys life insurance?
Maybe it’s because people simply don’t understand its benefits or they are baffled about the difference between Whole Life and Term Insurance.
Well, it has become more important to weigh the pros and cons between term life vs. whole life insurance than it was 10 years ago. So let’s compare the benefits of each.
Term Insurance is low cost cheap life insurance. The younger you are the cheaper it is the more you can afford to buy.
Whole Life Insurance is taken with the intent to cover your entire life; hence it tends to be more expensive, but it accumulates cash value and pays dividends. Most whole life insurance policies will be worth more than you put into it after funding it for 15 years. Example; you pay $1000 a year for your whole life policy and after 15 years its cash value could equal the amount you put in ($15,000) if not more.
Term Insurance is great when you have a short term need for life insurance. Example; you have a 30 year loan for a house at $200,000 you buy a 30 year term insurance policy for $200,000 to cover the loan in the event you die before the loan is paid off. Its premiums get higher the older you get. It becomes very expensive for people over 55.
Whole Life Insurance allows you to pay level premiums for life. Example; if you start out paying $50 a month at age 25 for a $100,000 whole life policy you will still be paying $50 a month at age 65 or 95.
The winner will be whole life over term for those of you that want affordable protection for your entire life. Plus it builds dividends and cash value which you can borrow on if you needed some quick cash during those building years.