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Term Life vs. Whole Life Insurance Questions

By Compuquotes Team on March 26th, 2008

What is the difference between term life insurance and whole life insurance?

Term life insurance is insurance that lasts for a specified period of time and them expires if not used within that period. Whole life insurance lasts for your entire lifetime, and has secondary investment aspects.

Which one is best for me?

This really depends on what stage of life you are at, whether you have dependants, and, yes, even what you can afford right now. See some of our other helpful articles for insurance solutions for parents, retirees, or even singles.

Which is more expensive?

Whole life insurance tends to have higher premiums than term life insurance, but the fact is that your whole life insurance will never end and never expire. Term life insurance will come to an end, and it will cost you more money to renew it because you have to buy a new policy at a new rate, and you will be older and therefore higher risk.

Do I really need insurance?

Everyone needs insurance. Insurance is what keeps your loved ones from the unexpected burden of taking care of a funeral and other financial matters that you may have left unresolved. It is just as responsible and just as necessary as providing your survivors with a will.

If I am insured, should my spouse be, too?

If you are insured and you die, your spouse will be protected and financially aided. If he or she were to die, you would want to have that same protection provided to you to help ease the burden that they will have left behind. Again, everyone should be insured.

Do my insurance needs ever change?

Absolutely, yes. If you have just bought a house, then you will need to leave your spouse enough money that a mortgage will not sink him or her. If you have young children, then you will want enough money left behind to provide for them. If you are retired or single, then a simple whole life insurance policy might be enough to see you through.

What about investment?

While whole life insurance policies do carry an investment with them, it is a minor one and should not be relied upon for your retirement. Fees and costs limit how much of your premium is actually included as a part of that investment, and you do not want to be stuck without enough to live on. This money can be borrowed against at a rate determined by the insurance company, which can make it a convenient fallback when you need it.

Does age matter?

Age does matter, and the sooner you can buy a whole life insurance policy, the cheaper your premiums will be for the rest of your life. Similarly, health is an important factor. If you drink or smoke, your rates may be significantly higher than someone without those risk factors. Term life insurance rates will go up each time you renew a term policy, as you will be older each time. Take this into account when choosing what kind of policy you want to invest in.

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