Term vs Whole Life Insurance: Uncovering the Best Fit for Your Future

What if. Life insurance works off what-ifs. So, when beginning your life insurance journey, consider whether term or whole life insurance is better for you. 210 Financial will explore term vs. whole life insurance to help you better understand what each means and what they can do for your loved ones when trying to predict the future.  

Learn More: Episode 7: Is Life Insurance Valuable? 

Term Life Insurance:  

Term life insurance offers protection for a specific period and is usually the cheapest option, with no cash value. The premium payments remain constant for the policy’s duration, which can be 10, 15, 20, 25, or 30 years. After the policy expires, you can renew it annually at a higher rate through guaranteed renewability.  

What are the Pros? 

Term is how term sounds it’s a temporary policy that expires over time, but the policyholder can either renew it for another term.  

• Guaranteed death benefit payment but only if the policyholder passes during the agreed-upon term.  

• Term life insurance is a cost-efficient policy.  

• It’s flexible because you can choose the length that makes the most sense for you at the time.  

What are the Cons? 

With all the good, there must be drawbacks, and it’s important to know what they are.  

• Term life premiums are based on a person’s age, health, and life expectancy.  

• The policies, while cost-effective at first, go up as you age because of the increased age-related health risks.  

• It only pays out a death benefit with no cash value.  

Example:  

Term life insurance policies can look like this:   

Take Tim, a 30-year-old who wants to protect his family in case of an early death. He purchases a 10-year, $500,000 term life insurance policy with monthly premiums of $50. 

Let’s say Tim passes away within those 10 years the policy then pays his beneficiary $500,000. But if he passes away outside the 10-year term the beneficiary receives no payment.    

Term insurance policies:  

• Level Term: Has a fixed monthly payment for the policy’s life.  

• Yearly Renewable Term (YRT) Policy: This is a one-year renewable policy where you don’t have to provide evidence of insurability.  

• Decreasing Term Policy: These policy’s death benefits decline every year according to a predetermined schedule. 

 

Whole Life Insurance: 

Whole life insurance, or permanent life insurance, provides lifetime coverage, and builds cash value over time. Although more expensive than term life insurance, it offers additional benefits and long-term security.  

In exchange for regularly due premium payments, you get a guaranteed death benefit payment to your beneficiaries.   

What are the Pros? 

Whole life insurance offers a cash savings account that the policy owner can borrow from and earns a fixed rate of interest.  

• Lifetime coverage provides coverage until the insured’s passing.  

• Cash value you can use for loans, withdrawals, or premium payments within your lifetime.  

• Includes a guaranteed death benefit amount from when you sign the papers and stays the same while the policy is active.  

• Predictable premium payments with a fixed rate  

• Tax-free loans   

What are some Cons?  

Interest is charged on policy loans at varying rates, which are lower than other loans.  

• More expensive than term life insurance 

• No flexibility to adjust the premium  

• Limited ability to adjust the death benefit because it’s established when the policy is issued.  

Whole Life Insurance Policies:  

• Whole Life Insurance: Balances guaranteed life insurance coverage with cash value (a clever way to supplement retirement income).  

• Custom Whole Life Insurance: This policy has options within your premium payment years to a certain number.   

Conclusion: 

The next big question to ask yourself, which one is right for you. Still not sure? Ask one of our advisors who can help you determine what life insurance plan will work better for you term or whole life insurance. We cannot predict the future, but we can work on being prepared. Meet us to get started!  

---

 

210 Wealth Management, Inc., d/b/a 210 Financial, is a federally registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. 210 Financial, Form ADV Part 2A & CRS can be obtained by visiting: https://adviserinfo.sec.gov and search for our firm name. Insurance products are offered through 210 Financial, Inc. d/b/a 210 Financial.