Life Insurance: Whole life and term life


Manage episode 292430503 series 79150
By Douglas Goldstein and Douglas Goldstein | CFP® | Profile Investment Services. Discovered by Player FM and our community — copyright is owned by the publisher, not Player FM, and audio is streamed directly from their servers. Hit the Subscribe button to track updates in Player FM, or paste the feed URL into other podcast apps.

What is the difference between term and whole life insurance?

Term life insurance is pure insurance; you pay the insurance company a premium, and if you die within the predetermined period, then they’ll pay your heirs/estate a lump sum of money.

Whole life insurance has a cash component – part of your premium goes into a savings account which you can access if you ever are short of cash. The rest of your premium goes to buy the life insurance itself. Since the entire premium doesn’t go to the insurance component, whole life policies tend to be more expensive than term policies.

Is buying life insurance just throwing money out of the window?

While it is true that you personally won’t benefit from life insurance, your loved ones will receive money when you die, which should replace your lost income.

Additionally, you can use the savings component of a whole life policy as an additional part of your financial plan – withdrawing funds that grew tax free. (Note, income tax is paid on investment gains from withdrawals. I’m not a tax advisor. For tax advice consult an accountant.)

Which policy should I choose?

Listen to the podcast for more tips on how to decide which type of life insurance is best for you.

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