Going through quotes for life insurance online, it will be clear to you in minutes that whole life insurance is not the cheapest option. Term insurance has it beaten easily in the price department. You owe it to yourself though, before you dismiss whole life, to take a little time to educate yourself about the differences not only between term and whole life, but between a term policy and all the forms of permanent life insurance. You won’t make the best decision regarding your life insurance needs from one instant whole life insurance quote, because price should only be one of your criteria. If educating yourself about life insurance sounds like a lot of work, fear not: with a good, free guide to the basics of life insurance, you’ll be able to drill down and have a general idea about what makes sense for you and your family in just a few hours.
First of all, you want to have the difference between permanent and term life insurance clear in your mind. Permanent policies have a guaranteed payout, payable either to your beneficiaries when you pass away or to you when you reach a very advanced age, usually 100. They have a so-called cash value amount that normally increases through the life of the policy, that is meant to cover the death benefit payout when you pass away. Now a whole life policy is the simplest form of permanent life insurance: the premiums usually stay the same over the duration of the policy, and the cash value builds based on accruing interest. Other forms of permanent insurance like universal life, variable life, and variable universal life, allow for much greater flexibility in what you are allowed to do with the cash value. With them you a free to put the money into different investments, and/or you may vary the amount of coverage that you need with the policy as your needs change. Be aware of all this when you arrive at the lowest whole life insurance online quote: again, you need to look at a lot more than just price!
With term life, you simply pay a fixed monthly premium over a length of time specified in your policy, usually between 10-30 years. In return, if you pass away during this period, your heirs receive the death benefit payout. However, if you do not pass away during the policy’s term, and this is the key, nothing is paid out. Statistically you are likely to outlive the policy, and this is exactly the reason that term rate quotes are so breathtakingly low. (You can purchase a clause included in the the term policy that allows for a ‘return of premium’ at the end of the life of the policy, but this will increase the premiums, as you would expect.)
So whole life is more expensive than term, and allows me less flexibility than the other forms of permanent insurance– why would I buy it? Well some people prefer the straightforward nature of the policy, the idea that ‘forced savings’ will leave them better off when they retire, as it is usually possible to borrow against the cash value amount. Also, they will not be left without life insurance at the end of some arbitrary term, and be much more expensive to insure at that time. There are benefits in whole life for some people after all; if there weren’t these policies would no longer exist.
In the end though, for most people, experts advise to get a good term policy and diligently put money into investments geared for the long term. In this way, you don’t pay the often substantial fees that an insurance company will charge you just for maintaining your whole life policy. Basically the investment aspect of whole life policies is rarely worth the higher cost of the premiums, and although you won’t have a defined death benefit payout with a term policy, you will very probably have more than that amount by the end of the policy, if you do save and invest responsibly. Can you see now why there is much more to this picture than a just pulling up a free whole life insurance quote?