Term vs Whole Life Insurance

Buy term and invest the difference (part 2)

When considering whether to buy Term vs whole life insurance you’ve probably heard that you shouldn’t buy it and you should just buy cheap term life and invest the difference.

Read part I here: whole life insurance advice, if you haven’t already.

Here are some things you need to ask yourself:

• Will you really invest that money you’ll be saving?
• How much will you be saving?
• What are the “real” costs you’ll be paying by choosing term over whole life?

And by “real costs,” I mean, “what will you be giving up by choosing term vs whole life?”

Although it could be sensible advice (depending on your own personal situation), you really need to know more about the differences between Term vs permanent life insurance and decide if one will suit you better than the other.

Term vs whole life insurance-
How much will you be saving?

Let’s say you decide to buy that cheap term life policy instead of whole life insurance because you’ve been sold on the “buy term and invest the rest,” idea.

Okay great! Let’s use an example and say you are 30 years old and have received your term quote of $15.00. Your coverage will be for 20 years with a death benefit of $100,000.

Remember, in this example your coverage will expire when you are 50 years old because term life is temporary insurance, read more about it here.

Now let’s take that term life insurance rate comparison and put it next to a whole life insurance quote. Let’s say your whole quote comes out to about $40.00 for lifetime coverage with the same death benefit of $100,000.

When you put those two side by side you see that with the term policy you’ll be saving about $25.00! So as far as saving money goes, term certainly beats whole life… and all other permanent policies for that matter!

So you have $25.00 extra dollars a month to invest which comes out to $300 a year and over the course of 20 years that equals $6,000!

The big question here is: “Will you really invest that money?”

So will you really invest that extra money? Or will you just buy term and put off investing until you totally forget about it and it becomes a faded memory!

If you don’t you’re missing out on some potential for real growth. If you do decide to buy term to invest the rest, set it up immediately and make it automatic so you won’t have to worry about it!

Term vs Whole Life Insurance

What are you missing out on when you choose term life over permanent life (whole)?

You know by now that whole life insurance rates are more expensive when compared to term resulting in you saving more money over time that you can invest elsewhere. But did you know that if you choose term, once your term is over and you find that you still need coverage your premiums will go up!

Higher premiums

We’ll use the same example above to explain. Let’s say after your 20 year term policy is up you want to renew it and by now you’ll be 50 years old. Now you’re older and your term quotes will be in the range of around $50 a month (just an example!) or so for that same $100,000 coverage.

Now this alone doesn’t seem like such a big deal considering if you had the whole life policy you would be locked in with the $40 premium. So it’s about a $10 difference. And remember, you were supposedly investing the money (hopefully) that you were saving by choosing the 20 year term policy.

Will you qualify for cheap term coverage later?

You might or might not and by then if you try getting a quote for whole life at the age of 50, your premiums will be much higher!

Remember that you will be older by then and with age you will naturally start to have more health problems than when you were younger.

No cash value

Speak to a trustworthy and knowledgeable agent today to help you decide between Term vs Whole Life Insurance!

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