Which Is Better – Term Life Insurance or Whole Life Insurance

One of the most frequent life insurance questions we see is: which is better – whole or term life insurance? If you follow Dave Ramsey, you know his thoughts on the subject: term life insurance wins hands-down every time. It’s the only kind that makes financial sense! It’s more affordable, straightforward, and flexible than cash value type plans like whole life insurance.

When it Comes to Money

Term life insurance premiums are far more cost-effective than those of whole life policies. That’s because with term life insurance, you only pay for the time period you select, whereas whole life insurance locks you in for the rest of your life. The misconception that you’ll needlife insurance forever is one of the reasons so many people waste money on cash value type policies, when in reality, most of them would be better off with a 10-15-year term policy! If you’re following Dave’s plan to attain financial peace, that should be enough time to pay down your debt and build up your savings so that you don’t even need life insurance. Remember – this should be a temporary way to protect your family while you’re working toward being self-insured.

When it Comes to Transparency

One of the worst things about whole life insurance is all the gimmicks that come with it. The purpose of life insurance is to protect your family – not to build wealth. While saving and investing is a great thing to do, your life insurance policy is not the place to do it. You’ll come out with much more in the long run if you bypass the bells and whistles, treat your life insurance as pure protection, and invest your money elsewhere. The best part? The money you save on premiums will provide plenty for you to invest!

When it Comes to Options

With term life insurance, you choose your term and your face value amount. This customization allows you to select what’s best for your specific situation and allows you to increase that protection in the future, so that even if you can’t afford as much protection as you’d like now, your family isn’t left unprotected while you save up for it. Dave recommends 10-12 times your income in coverage, which is much more easily attained with a term life insurance policy. Many times, people get less coverage than they need because it is too expensive to get this level of coverage with a whole life policy!

For term length, a good rule of thumb is 10-15 years – it’s what Dave suggests as the timeframe in which most people will be able to consider themselves self-insured. Factors to consider are debts, savings, the age of your children, and, of course, your income. Our team is here to help you adjust the face amount and term length so that your family and your budget are protected.