Quite a bit has been made about the evils of whole life insurance, especially by the television and radio financial gurus like Suze Orman and Dave Ramsey. Term life insurance, they argue, provides more coverage at a considerably lower cost. Dave Ramsey calls whole life insurance "a rip off". This article will explore the term vs whole life insurance debate and provide you with some food for thought as you are making a decision about which kind of life insurance is best for you.

The Term vs Whole Life Insurance Debate

So here is how the argument goes:

Say Bill, I see you have a $50,000 whole life insurance policy. What is that costing you, $75, maybe $100 per month? Did you know that you can buy a $250,000 term insurance policy for $25 per month? That’s five times the coverage at less than half the cost! That whole life insurance company is ripping you off.

OK, so what we see here is that term insurance and whole life are presented basically as two different versions of the same thing. If that were true, then whole life is indeed the "rip off" that Dave Ramsey claims that it is. But is it possible that there is something more going on here?

The Truth about Term vs Whole Life Insurance

I don’t know about you, but anytime I see an article that starts with the phrase "The truth about…" my defenses go up. I figure that the author is about to pitch me on their views about something and try to convince me that those views are "the truth", so what I am going to do is just present some facts about term insurance and whole life. Hopefully these facts will help you decide what is best for you.

Here are some facts about term insurance…

Low premiums, typically guaranteed to remain level for a period of time (10 years, 15 years, 20 years and 30 years are common)

Term insurance policies do not accumulate cash surrender values

Term insurance policies are designed to last for a defined period of time (i.e., the term)

After the term is up, you can usually keep the policy, albeit usually at very high (and annually increasing) rates.

Here are some facts about whole life…

Whole life is a level premium, level death benefit policy

Premiums are often higher than a term insurance policy of the same death benefit, but premiums are guaranteed level for life

Whole life is designed to last your entire life (i.e., your "whole" life!)

Whole life insurance policies accumulate cash surrender values that can be used by the policy holder

I’ve been in the insurance and financial services business for about 6 years now, and in that time I’ve run hundreds of "term vs whole life insurance" scenarios, so I have a good idea of how the numbers work out. The bottom line is that if you want or need life insurance for a defined period of time you are better off with a term policy. So if you want life insurance coverage for, say, 30 years (until the mortgage is paid off), a level term policy is a great way to go. On the other hand, if you want or need a life insurance policy that will last as long as you do, whole life is a better and less expensive choice.

The "gurus" that I mentioned make a fuss about how agents get "paid more for selling whole life", but that simply isn’t true. We get paid on premium, pure and simple. If you buy a policy from me that costs you $100 per month, my paycheck isn’t bigger if it is a whole life policy. In fact, industry-wide, term insurance typically pays agents a larger percentage of that first year premium than whole life does.

The real "truth about term vs whole life insurance" is that both are good products and each meets a specific need!

Making a Decision that is Best for You

All right, you’ve read this (hopefully wonderful) discussion about term vs whole life insurance. Now it’s time for you to make a decision. I hope this article give you some good information and made you think about your needs. Now head on over to our life insurance rates page and run some quotes. If you find something that fits your budget, just click on the "request application" button and I will make sure you get the paperwork you need to get started.

Contact us or follow the links to learn more about term vs whole life insurance or to find out which type of life insurance policy is right for you.