100 Words On: The Trouble With Whole Life Insurance (vs. Term)

The key difference between term and whole life insurance is simple. Term life pays the face amount of the policy in the event of your death, while whole life combines a term policy with an added investment component. Yes, whole life may sound like a better deal — the trouble is it’s the least cost-effective option because you end up paying for both the insurance and investment components.

The bottom line: Don’t waste your money on a whole life policy. Instead, buy term insurance to protect your family’s standard of living in the event of your early demise — then invest the savings.

Photo Credit: Steve Snodgrass


  1. 3


    I agree in concept that term insurance is cheaper and a better choice. If your health deteriorates and you can no longer qualify for insurance, whole life would have been a better choice. It is a tough call. Perhaps a term policy that is guaranteed renewable for thirty years when you are young and healthy and make sure you have enough investments to take care of the family.

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    @Robert: Yes, plus with whole life, usually most if not all of the first year’s contribution that is should be going towards your investment portion is instead used to cover fees and salesmen commissions, so your investment portion doesn’t start building until year two!
    @krantcents: Agreed. I only had 100 words so I had to be very general. Whole life is good for older folks who would be forced to pay higher premiums for term life. It’s also good for wealthy individuals who are looking for tax shelters.

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    problem with term is that premiums keep increasing and you are always paying for a term insurance! Most folks think that by a certain age (with savings etc) that they can “save $1mm”…so they figure once they reach that amount, they stop buying any term insurance.

    But most folks will never be able to save that amount. Yet, when they reach middle age, things happen. Careers get derailed, spouse falls sick and cannot be insured. Or you fall sick and even the term premiums go up.

    With a whole life policy, a person may simple stop paying after a certain period because the policy is “paid up”.

    So maybe we can make the analogy of buying whole life as equivalent to “buying your own house” and “term” to renting..

    I’m not saying that term makes sense for most people. But you cannot simply dismiss whole life.

    And we have not even touched on estate planning yet!

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      Term premiums do not keep increasing, Mr. CC. I have a 30 year policy that I bought in 1989 and the annual premium is the same today as it was 22 years ago.

      My position is once the house is paid off and the kids are out of the house, there really is little need for life insurance anymore. So the fact that term insurance is more expensive in your 50s than it is in your 20s becomes immaterial.

      I agree, if you feel the need to still carry life insurance in middle age, then whole life is probably the cheaper way to go.

      And you are right, there are benefits of whole life for estate planning purposes, but in my opinion they’re not enough in my book to justify a 20 or 30 something person to choose whole life over term. :-)

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    Difference amid whole life insurance and term insurance is very significant. In whole life insurance that can reimburse either constantly until the unthinkable happens and insurance has no term. On the other hand, term insurance is much less expensive and more reasonable. Whole life insurance is for somebody who expects to live 20 or more years from the day of procure. If you are not interested or able to pay then this is nonsense. In the case of term insurance if you cancel it or the term comes up you lose your hard-earned money. Your investment is a little bit more expensive, but on the other hand, if you decide to cancel completely your whole life insurance, you’ll take your investment back. In the expression of term insurance if you give up or the term comes up you will lose your hard-earned money.

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    Gina says

    My husband’s employer is now offering a a whole life with Long Term Care rollover, I signed us up wanting the long term care aspect. We are in our mid 40’s, no children, so having one less thing to worry about in our old age justified it in my mind. I could be wrong. But seeing two of our parents (NOT GRANDPARENTS) slowly wither away in a horrible nursing home that was state run and paid for by Medicaid, makes me want to throw all our money at a LTC policy.

    • 9

      Len Penzo says

      As I get older, I’m beginning to find that long-term care (LTC) policies are worth considering. I’m still waiting to pull the trigger, however.

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    Karen Kinnane says

    Many time the most enthusiastic proponents of whole life policies are those who sell them and pocket the, shall we say ‘healthy’ commissions. there are few flogging the benefits of term insurance because the commissions are minute. Food for thought.


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