30 Year Term Life Insurance vs Whole Life Insurance

A 30 year term life insurance makes more sense than a whole life insurance policy in most cases. Some financial experts often tout the investment aspect of a whole life insurance policy, because it has a cash value. When you compare the two types of policies, however, it's clear that a whole life insurance policy and its associated costs doesn't compete with other types of investment vehicles.

Cash Value Policies

Whole life insurance is a cash value policy, which means it is a financial product that offers savings and insurance mixed together. A 30 year term life insurance policy is not. You may think that you're getting a great investment opportunity with a whole life insurance policy, but that's not the case. The portion of your premium costs that should be allocated to your savings has these costs associated with it:

  • Commission to the insurance agent
  • Expenses to maintain the overall investment
  • Monthly expenses to maintain the insurance and savings portion of the account

The best return you can hope to see on your investment in a whole life insurance policy is close to three percent. You could see larger returns in even the most conservative investment.

Long Term Scenario

When you die, your beneficiaries will be given the face value of the insurance policy, whether it's a term life insurance policy or a whole life policy. The problem is, you would have been paying extra each month for the latter. For example, if the coverage amount is $500,000, that's what your beneficiaries will be paid out if you bought either type of policy. It doesn't matter that you paid an extra hundred dollars for a whole life policy. It's for that reason that you should consider investing the extra money that you don't have to pay for a 30 year life term policy in other assets, such as real estate. The value of the property may grow and yield a higher rate of return for your beneficiaries.

Costs for both Policies

Whole life insurance costs more than a 30 year term life insurance policy. It's often not affordable for families just starting out, but the appeal to some policy holders is the hope of growing an investment. One disadvantage of term life insurance is that when the term expires, the premium costs will go up significantly when you try to renew it. The premium costs do not go up with a whole life insurance policy. The purpose of buying a 30 year term life insurance policy is to have enough time to invest in other assets that you can bequeath in a will, place in a trust for beneficiaries or to have as a backup in case you die within the term period.

Whole life insurance doesn't make much sense when there's a 30 year term life or other forms of term life insurance available. Proponents of whole life insurance policies argue that individuals don't have the discipline required to save, and that they need this type of insurance to build their savings for them. You would be better off acquiring the discipline than buying into a whole life policy.

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