Term Versus Whole Life Insurance

Term insurance, also called temporary insurance, covers a person against death for a limited time -- the term.  For example, the term might be until children are grown, college is paid for, or until retirement.  You pay for the coverage period and at the end of the term the contract, or policy, expires.  If no claims are made against the policy during the term, you don't receive any benefits after the policy expires.  At the end of the term you can apply for more insurance if you still need it.  However, if you are in poor health you may not qualify or it may be very expensive.  Be sure to make the term sufficiently long to meet your goals.

Whole Life insurance, also called permanent insurance, is permanent and does not expire (assuming you continue to pay the premiums).  It provides coverage similar to term insurance, but it also provides an investment vehicle.  A portion of the premium goes toward insuring your life while the rest goes into investment account.  This investment account can be either an interest bearing account, stocks, bonds, or a combination of each.  

Which is better (our opinion)? Young families with large financial obligations are usually better off with term life insurance.  The substantially lower premiums enable them to purchase sufficient coverage to protect against loss of income.  Any discretionary investment funds should first be placed in investments than can be purchased with pre-tax dollars (IRA’s, 401(k)s, 302(b)s, SEPs, etc.) then other vehicles that use after tax dollars (mutual funds, money market accounts, etc.) that are likely to generate returns similar to or better than life insurance contracts.  Whole Life insurance is sometimes purchased by people for tax and estate planning purposes.

Our Pledge. It is our professional obligation to help our clients to select the amount and type of insurance that best suits their individual requirements.  It is important that we determine this information in our interview process so that we can recommend the proper coverage at the least possible cost. 

Frequently Asked Questions (FAQ). Click here for frequently asked questions.