Term Life Insurance vs. Whole Life Insurance

Term life is “pure” insurance, whereas whole life adds a cash value component that you can tap during your lifetime. Term coverage only protects you for a limited number of years, while whole life provides lifelong protection—if you can keep up with the premium payments.

1. Why Whole life insurance is a bad idea?
2. What happens to term life insurance at the end of the term?
3. What is a disadvantage of term life insurance?
4. Do you get your money back at the end of a term life insurance?
5. What are the pros and cons of whole life insurance?
6. Should I cash out whole life insurance?
7. When should you stop term life insurance?
8. Can you cash out a term life insurance policy?
9. Is term life insurance a good investment?

Why Whole life insurance is a bad idea?

One of the biggest selling points of whole life, or permanent life insurance, is that it builds cash value you can borrow against. Many whole life insurance policies also pay dividends, but they aren't guaranteed.

What happens to term life insurance at the end of the term?

When you outlive your term policy, you will no longer have life insurance coverage—but you can convert to a permanent policy or buy new term insurance.

What is a disadvantage of term life insurance?

Disadvantages of Term Life Insurance

Premium payments for term life insurance increase after the initial guarantee period. For example, if you own a 10-year level term policy, you can expect a significant increase in your premium after the 10th policy anniversary. Cost Prohibitive Over Time.

Do you get your money back at the end of a term life insurance?

Do you get your money back at the end of term life insurance? You do not get money back when your term life insurance policy expires, unless you purchased a return of premium life insurance policy.

What are the pros and cons of whole life insurance?

Whole life insurance has both pros and cons:

• Whole life costs much more than term life insurance.
• The investment portion of the policy typically charges significant fees.
• The insured often has limited control over investment choices.
• Ideal if you need insurance throughout your life.

Should I cash out whole life insurance?

Whole life insurance policies are the best option for some people, especially those who will always have dependents due to disabilities and the like. But if you're paying for an expensive policy you don't really need, cashing out may be the best option, even if you have to pay fees and taxes.

When should you stop term life insurance?

Ultimately, you should keep your term life insurance for as long as you have a need for the insurance–children at home, a non-working spouse to provide for if you die, or to pay off a mortgage.

Can you cash out a term life insurance policy?

The cash value of a life insurance policy works like an investment or savings account and grows tax-deferred over the life of the policy. You can take out a loan against the cash value, surrender your policy for the cash, or use it to pay your premiums once it reaches a certain amount.

Is term life insurance a good investment?

Short answer: it is. Term life insurance provides an affordable way to help financially protect your family. If you're asking yourself whether life insurance is worth it, the answer is simple. Yes, life insurance is worth it — especially if you have loved ones who rely on you financially.