• Are your needs only for a few years?
  • What are you insuring?
  • Can you afford higher premiums up front?
  • When will you die?

Are your needs only for a few years?

Term life can cover you from one to 30 years, and there may not be a large need for insurance after you debts are paid, etc.

Whole life provides life insurance coverage your entire life, regardless of when you "check out." Your senior years are when you'll most likely use your life insurance, and you want to have coverage during these years.

What are you insuring?
Term life protects against something that has a time constraint, like say, your mortgage or paycheck. After you've paid off the mortgage and/or retired, you may not need more coverage. Term life is used to protect primarily against pre-mature death.

Whole life is used primarily to a benefit upon your death regardless of age (i.e. to pay estate taxes). Consider whole if you have few assets and want to create an estate or at least pay for your burial. It's also a good idea for either the affluent with a large estate (estate taxes), or to compensate for a pension that will not fully pay your spouse if you die. There is some peace of mind by buying whole life because you'll always have coverage as long as you pay your premiums. Go to Insurance needs for more on this topic.

Can you afford higher premiums up front?

Term life can save you many shekels or allow you to purchase a larger death benefit because you're only paying the cost of insurance and building no cash value. But remember, the chances of you dying prematurely are lower, and premiums for term life reflect that.

Whole life has higher premiums initially than term but if you end up living a long while, the difference in premiums between term and whole may equalize, especially if you try to get insurance after your term life contract is up. Go to Insurance Savings for more on this topic.

When will you die?

Term life may be perfect if you die prematurely. Of course, none of us know when our number will be called, but it may be cheaper to get term if your family tends to have a shorter longevity. Term life insurance companies usually won't provide coverage past age 75-80 unless you convert your policy before hand, which can be ultra expensive. Term life is bought to protect your family if you die prematurely. People that have a family history of premature death may be well served by term coverage.

Whole life covers you for your entire life (with enough cash value). There is peace of mind knowing that you'll always be covered as long as you pay your premiums. If your familiy tends to be hangers on, then you may want to look at whole life. But no one knows when their ticket will be up!

Term vs. Whole Life Insurance Summary

People get life insurance to protect against loss, so we have to analyze this objective before going on to cash value, riders, interest rate, etc. You should buy all the coverage you need now while you're younger, and if you can't afford whole life insurance, at least get Term. Temporary term coverage is better than no coverage at all. If you can afford the higher premiums of whole life insurance, examine if your insurance needs are only for a certain number of years, what you're insuring, and when will you're likely to die.

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