When it comes to term life vs whole life you are probably stuck on trying to decide which option to choose:
A quick search in Google for which is better term or whole life insurance? and you will find several posts all with different answers on which option is best.
So, I took a different approach:
I decided to teach you the differences between term vs whole life insurance and I also asked over 40 personal finance experts and bloggers a simple question:
Term life vs Whole life, which would you choose and why?
These experts are among the top in the industry, some of them have overcome thousands in debt and others are licensed professionals. So, should you buy term or whole life insurance? Well, lets learn what they are first and then get the results to the battle we’ve all been waiting for.
What Are The Two Primary Types Of Life Insurance
There are two primary types of life insurance that make up all of the different forms of life insurance. They are term life insurance and permanent life insurance.
Term life insurance is a type of life insurance that will last for a set amount of time as long as the premiums are paid. You will also find that term life insurance quotes are always more affordable than whole life insurance quotes.
Permanent life insurance is a type of life insurance that will last for your whole life as long as the premiums are paid. Whole life insurance is the most known form of permanent life insurance.
Which Is Better Term Or Whole Life Insurance?
The personal finance experts have given their answer and they largely prefer Term Life Insurance over Whole life when it comes to buying coverage.
Term Life Insurance Is The Clear Winner!
37
Term Life Votes
2
Whole Life Votes
6
Neutral Votes
Our Personal Finance Experts
We reached out to some of the brightest minds when it comes to personal finance, from bloggers, freelance writers, to licensed agents and financial advisors.
The Experts Discuss Term Life vs. Whole Life
Read below to review each expert’s choice and advice on which life insurance option would be best:
#1: Holly Johnson (Club Thrifty)
Twitter:@ClubThrifty
Answer:
We have purchased term life insurance a few times, with the last being just a few months ago. We prefer term life insurance because it’s cheap and easy to understand. We purchased an additional $750,000 in term life insurance coverage on me a few months ago. I applied online with Haven Life and was approved with no medical exam that day. The kicker? 750K in coverage for me was less than $28 per month. The same policy would have easily cost $500 or more per month if we had purchased whole life instead.
#2: Tom Drake (Maple Money)
Twitter:@MapleMoneycom
Answer:
When I increased my life insurance coverage a few years ago, I chose term over whole life insurance.
The policy is set up so that when the term expires, my wife and I will be able to self-insure using our own assets.
In the meantime, I avoid paying costly whole life premiums on coverage I will never need.
#3: J.D. Roth (Get Rich Slowly)
Twitter:@getrichslowly
Answer:
Generally speaking, term life insurance is the best option for most families.
This isn’t universally true, but it usually is.
Unless you have some very niche needs, whole life insurance probably doesn’t make sense. And remember:
Not everyone needs life insurance.
Life insurance is actually “income insurance”. It’s protection against the loss of your family’s primary income.
If you don’t have dependents, you don’t need life insurance.
If you have ample savings, you don’t need life insurance.
And if you’re retired (or near retirement), there are usually better options than life insurance to provide for your family.
#4: Andrew Schrage (Money Crashers)
Twitter:@MoneyCrashers
Answer:
There are many factors that go into answering the question of whether you should purchase term or whole life insurance.
A few of them include your age, general health level, your children’s age, your debts, and the financial needs of your family (if you have one)
There are others. And in some instances, it may be advisable to purchase both types of policies.
In a nutshell, term life insurance comes with a death benefit only, and this is only paid if you pass during the term of the policy, hence its name.
It is purchased for a preset period of time, usually 10, 15, or 30 years.
It is more expensive the longer you wait to buy it, however, it is generally less expensive than whole life.
With whole life insurance, you are covered for life, it also comes with a death benefit, but also typically builds cash during its life.
A medical exam is usually required to see if you qualify and as stated, it is generally a little more expensive than term life.
To give you a few examples of which is the best route to go.
A parent who is rather young, with children and who is the primary income earner for the household might want to go with a term life insurance policy.
One that would completely take care of your family’s obligations financially speaking should you pass prematurely.
If you are older, say beyond the age of 60, and your children are already grown and earning their own money.
A whole life policy might be a better bet which would cover the monetary needs of your spouse if that person lives well beyond your passing.
There are too many different scenarios to list out here.
Your best bet for making the right choice is to contact an insurance agent.
And go over all of the particulars of your personal situation to learn which type of life insurance policy is best for you.
#5: Tiffany Aliche (The Budgetnista)
Twitter:@TheBudgetnista
Answer:
Start with Term Insurance. It’s the most affordable.
Whole life only if everything else is funded: retirement, emergency account, investments etc.
Whole Life is how the wealthy pass their wealth on generation to generation.
#6: David Carlson (Young Adult Money)
Twitter:@davidcarlson1
Answer:
Term for sure.
Whole life insurance is more of an investment vehicle.
You are better off keeping insurance and investments separate.
#7: Michael Kitces (Kitces.com)
Twitter:@MichaelKitces
Answer:
Buy term insurance for the death benefit coverage you need.
Use the rest of your available dollars for your other goals.
#8: John Schmoll (Frugal Rules)
Twitter:@JSchmoll74
Answer:
For most individuals, there is no real comparison between Term and Whole life coverage.
Term is by and large that best product for most individuals.
Term is the better option for a number of reasons, such as being significantly cheaper and usually allows you to get more coverage.
Term coverage will expire, thus the term, but it’s the better value and the option my wife and I go with.
Many sales reps will try to convince you that Whole life coverage is the route to go but it’s simply not a good fit for most individuals.
#9: Trent Hamm (The Simple Dollar)
Twitter:@Thesimpledollar
@Trenttsd
Answer:
I would almost always choose a term policy (I hate to say “always,” but it’s hard for me to find a case for whole life).
The reason is that I want control over my investments.
Which means I don’t want my investments wrapped up with my life insurance policy in a package that isn’t completely transparent in terms of the benefits and returns.
Plus, even with the most optimistic “estimates,” I feel much more confident about both short term and long term returns from pairing a term policy with my own investments in index funds at the same total monthly cost over all whole life policies I’ve seen.
#10: Tracie Forbes (Penny Pinchin Mom)
Twitter:@PennyPinchinMom
Answer:
Term – always term.
Life insurance is not an investment tool.
Not only that, but life insurance should be used to cover expenses that may be result in your early death.
Coverage such as missed wages, mortgage, college.
It is not a tool to give your loved ones wealth.
#11: Ilyce Glink (Think Glink)
Twitter:@Glink
Answer:
Term. Because you get more coverage for less money.
#12: David Ning (Money Ning)
Twitter:@MoneyNing
Answer:
I prefer term life insurance because it insures what people really need.
Unexpected death causing a sudden shortfall in income.
Without adding in the complexity of the investment component of other types of life insurances.
#13: Philip Taylor (PT Money)
Twitter:@ptmoney
Answer:
I’m 41 and married with 3 young kids.
I chose term life insurance ten years ago (I bought a 20yr $500k policy).
This is best for me because I expect my kids and wife not to depend on me for income after the 20 year term.
I see whole life as a good product for people with long-term dependents (i.e. children with special needs).
#14: Sam Dogen (Financial Samurai)
Twitter:@financialsamura
Answer:
If you are filthy rich, with cash flow coming out the wazoo, then having a whole life policy is fine, despite the fees.
Whole life is another tax efficient investment vehicle to help grow your wealth.
But for 90%+ of people who need life insurance, term life is the way to go.
Fees are much lower and you’re allocating capital 100% towards a specific need.
Always review your net worth and future liabilities each year so you can properly ascertain how much term life insurance to have.
#15: (Million Dollar Journey)
Twitter:@FrugalTrader
Answer:
I’m a fan of the popular concept of buying term and investing the difference.
There are specialized cases where whole life insurance works, but the vast majority of people are better off going with renewable and convertible term insurance.
The cost of whole life insurance is onerous and the investment portion of the plan typically face high fees and under perform.
#16: Chris Huntley (Insurance Blog By Chris)
Twitter:@mrchrishuntley
Answer:
I’m not a fan of whole life insurance as an investment.
Advisers love to point out its tax and liquidity benefits, but I think those are outweighed by the poor investment return found in most whole life policies.
Dave Ramsey said the average return of a whole life policy over 30 years is 2.6%.
I also don’t like how the premiums are essentially forced.
If you stop making premium payments, the policy must take the premiums from somewhere, so it either pulls them from the cash value or creates a policy loan.
When neither are available, the policy lapses, and the owner could lose a high percentage of his/her initial investment.
Name another investment with such “forced contributions.” They don’t exist.
As for the tax and liquidity benefits, tell me what benefit it is tax-wise to pull out cash from an investment that hasn’t appreciated.
That’s the case with most whole life policies for the first 7 to 10 years.
There is no tax benefit during those years because even in a taxable account, you can pull out your money tax-free up to its basis.
I think the liquidity benefits are also overstated.
They’re nice for short term loans but many people take loans to supplement their retirement income.
The problem is policy loans accrue interest, and you could end up in a situation where you have to pay the loans down, something people never consider when they view their policy as something that gives them money.
I say term is the right choice for short term coverage needs, and for the few people who need permanent protection (for example, for estate planning needs) I recommend guaranteed universal life.
Guaranteed universal life offers a fixed level premium and face value like whole life, but typically at half the cost.
The only time I recommend whole life is when purchasers are looking to cover final expense needs, or who have tough health conditions, and can only qualify for guaranteed issue whole life policies.
It’s also useful in some unique business planning purposes.
#17: Joe Udo (Retire By 40)
Twitter:@RetireBy40
Answer:
I choose Term life insurance because it’s cheaper and easier to understand.
I want to make sure that my wife and kid won’t struggle financially in case I pass away.
We only need 20 years coverage because our kid will be independent by the end of the term.
Whole life insurance might be a good fit for some people, but I’d prefer to manage my own investment.
#18: Sophia Bera CFP® (Gen Y Planning)
Twitter:@sophiabera
Answer:
I’m a huge fan of term life insurance policies because the premiums are much more affordable.
I’ve never seen a situation where I recommend a whole life insurance policy to a millennial.
#19: Melanie Lockert (Dear Debt)
Twitter:@DearDebtBlog
Answer:
I tend to think Term Life Insurance is a safer bet.
It has more flexibility and you can choose a time frame that works for you.
It’s best to get life insurance when you’re young and rates are more affordable.
Taking Action
First, I want to give a huge thanks to the all the experts who contributed to the roundup. Please share if you enjoyed it. Secondly, if you need life insurance, as you can easily see that in the battle of term life vs whole life, Term Life Insurance was the winner. You can click on any of the above buttons to get an instant term life quote and to get coverage started.