Principal, LifeNet Insurance Solutions, Redmond, WA
This question is perhaps the most asked of agents, but cannot be answered with a "yes" or "no" because they are 2 different types of policies designed to work with different objectives.
Specifically, term insurance is designed to stay in effect for a specific period of time at level premiums. Depending upon age and health, term coverage can be a very low cost way of protecting against a premature death.
Permanent insurance can also be designed with level premiums, but is usually more expensive because the death benefit will always be paid no matter when the insured dies.
There are many reasons to purchase coverage, but rather that trying to decide what is best for you, talk to an independent agent that can help you meet your objective. That's the most important thing you can do.
Insurance Agent, Farmers Insurance, San Francisco Bay Area
Neither is 'best' in terms of comparing one against the other. What you need to look at is what you are going to count on this insurance plan for and why you need it. Term insurance is better for covering large amounts for shorter periods of time, such as putting a policy in place to ensure your children (or grandchildren) will have money for college should something happen to you prior to them completing college. Or you could set up a policy that would pay off your mortgage and/or other debts so you don't leave those behind in the event something happens prior to them being paid off. Whole Life insurance is better for establishing long term wealth accumulation.
Here's an example of the way I set up one of my customers. Since it is possible to have multiple policies, we set up a 10 year term policy listing their children as beneficiaries to guarantee they have money for college. We also calculated how much income they would potentially earn during that 10 year period and included that amount so their spouse wasn't left without income. Then we set up a 20 year term policy equal to the amount of their home mortgage so that would be paid off and calculated who much income they would earn during this next 10 year period. Finally, we established a whole life policy with a small face value to help establish an estate for their heirs. Since the whole life policy pays out the face value or the cash value, whichever is higher, the 'death benefit' of the whole life policy increased as time went on.
We also established that when the 10 year policy expired, if their income level permitted, they would continue making those monthly payments, but they would add that to the Whole Life policy. Doing this dramatically increased the cash accumulation of that policy after the 10 year mark.
So my recommendation for you is to meet with a qualified insurance agent or financial planner to establish the right scenario for you and your family.
That is a great question! Both of these types of policies have things that make them good choices. But they also have features that may not make them the best choice. That will depend upon your need. A term policy will be better for covering a short term need, or if money is very tight. A whole life policy is better if you want long term coverage, and want the option of having cash available should you need it. If you would like to find out which one might be a better fit, please contact me, and I'll help you figure it out. Thanks for asking!
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Specifically, term insurance is designed to stay in effect for a specific period of time at level premiums. Depending upon age and health, term coverage can be a very low cost way of protecting against a premature death.
Permanent insurance can also be designed with level premiums, but is usually more expensive because the death benefit will always be paid no matter when the insured dies.
There are many reasons to purchase coverage, but rather that trying to decide what is best for you, talk to an independent agent that can help you meet your objective. That's the most important thing you can do.
Here's an example of the way I set up one of my customers. Since it is possible to have multiple policies, we set up a 10 year term policy listing their children as beneficiaries to guarantee they have money for college. We also calculated how much income they would potentially earn during that 10 year period and included that amount so their spouse wasn't left without income. Then we set up a 20 year term policy equal to the amount of their home mortgage so that would be paid off and calculated who much income they would earn during this next 10 year period. Finally, we established a whole life policy with a small face value to help establish an estate for their heirs. Since the whole life policy pays out the face value or the cash value, whichever is higher, the 'death benefit' of the whole life policy increased as time went on.
We also established that when the 10 year policy expired, if their income level permitted, they would continue making those monthly payments, but they would add that to the Whole Life policy. Doing this dramatically increased the cash accumulation of that policy after the 10 year mark.
So my recommendation for you is to meet with a qualified insurance agent or financial planner to establish the right scenario for you and your family.