I had an interesting conversation with my fiancee’s father recently. The topic was life insurance and words like “term” and “whole life” started flying and I was confused to say the least.
With marriage looming in the not too distant future, life insurance has been on my mind lately and I’ve realized that I know very little about the subject.
So, what better way to talk about life insurance than an educational post!
There are two main types of life insurance out there: Term Life and Whole Life but what does it this life insurance cover? The two may sound similar but they are very different once you get down into the details!
Let’s go over term-life insurance first
Term life insurance is just that, insurance for an allotted amount of time. Simple enough.
What are the two situations than can happen? OK, let’s take a 25 year term life plan and take two stories. One person dies within the 25 year period and the other dies after the term set. Well, basically one person is screwed and the other is just fine and coverage will save them.
Now, whole life insurance
Whole life is pretty much always a bad deal. Ignore pleas to take out a whole life insurance plan. Insurance companies are not out to help you. Let’s dig in further.
This type of insurance will cover you for the rest of your life. However, you’ll be ripped off in the process!
There are some benefits though, such as assurance of payment no matter what and dividend payments. In the long run, this is cancelled out by the high costs. Definitely not worth it.
What now?
I recommend that you shop around and get advice from an insurance broker. Get some insurance related life quotes and you should be good to go. I will always recommend term life because it frees up your money for other things like saving for retirement. Don’t get sucked into whole life and just go with term life insurance!
Term is definitely less expensive! Whole life has cash value and an investment component. The biggest difference is the unknown. If your health changes you may not be able to get insurance at the same rate. This is very difficult to predict. You could use your family history as an indicator.
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It is only term insurance for me. Why let an insurance company make money off of me while waiting for me to die? I can invest and make it myself.
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