Whole Life Insurance vs Term Life Insurance


Unlike term life insurance, whole life insurance never expires and also includes a cash value component. It’s also significantly more expensive, costing as much as 15 times more than a similar term life insurance policy. In many cases, it’s not the best option.

“For those who need life insurance because someone depends on their income to live, term life insurance is a dramatically less expensive option for the same level of death benefit,” says Schneider. For those who are drawn to the cash value component of whole life insurance, “you can invest the remainder of what you would have paid for a whole life insurance premium and come out way ahead — whether or not you meet your untimely demise.”

Still, there are some scenarios where a whole life insurance policy might make sense. “If you’re certain that you want one or more beneficiaries to receive a payout no matter when you die, then whole life may be a good choice,” says Adams. “For example, if you have a disabled family member who earns no or little income or an aging parent who requires expensive, ongoing care, a whole life policy can be part of your estate planning.”

But speaking of estate planning, Schneider offers this caveat: “[Whole life insurance is] often sold as a way to pass wealth tax-free to your children. The insurance salesmen almost always forget to mention that there is no estate tax on the first $11.7 million you pass on to your children if you’re single ($23.4 million for married couples), rendering that benefit moot to all but the extremely wealthy.”

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