Whole Life Vs. Term Life Insurance
Whether you’re willing to accept it or not, life insurance is an investment just like any other, and you should do just as much due dilligence with your insurance provider as you would an investment manager. I’ll do a very simple comparison between the two most prominent life insurance options, whole life insurance and term life insurance.
Term Life Insurance Pros
First and foremost, term life insurance is far less expensive than whole life insurance since the term purchased is usually in what insurance agencies call the “prime of life” of 30-60 years old. Very few people die during this age range and are much less likely to take extreme risks compared to a 20-something.
Term life insurance also allows you to buy insurance for only the period you need. You should really only need life insurance to replace your income for a spouse in the early years, or to provide for your children until they become adults.
Term Life Cons
Term life insurance lasts only for a certain time period. Should you die one month after that term expires, every dime you paid into it is gone, and you’ll receive zero payout.
Term life insurance also assumes that later in life your other investments will have performed well enough that you wouldn’t need the annuity benefit of a whole life insurance plan. Since the insurance company takes the risk, not you, you do have a certain benefit of limited exposure…that is if the insurance company is still alive to make good. 
Whole Life Insurance Pros
There are two major benefits to whole life insurance. First, you’re guaranteed a payout as long as you 1) die, 2) make payments. At least one of those is certain.
Next, you’ll build equity in your whole life policy that you can cash out. The equity is generally very small, and is often used as bait to get you to close out a policy as you age. So, I guess this could be both a pro and a con. What may seem like small money now is huge if you’re an aging senior with little retirement savings.
The equity you build in your policy is tax deferred and you may end up building enough equity that you can stop making contributions well before the designated end date. However, don’t expect that to happen, you’d probably need DOW 10,000 to see it.
Whole Life Insurance Cons
Whole life insurance costs multiple times that of term life insurance for one very simple reason. The insurance company knows that you will, in fact, die. With term life, the insurance company makes a wager that you won’t die within the term purchased.
Whole life insurance is set in stone, so you’ll need to be certain of what you’ll need in the future should you go shopping. Insurance companies can’t rate jack you, but they won’t lower your premiums either. Be certain, because if you find out you need more insurance later you’ll be forced to pay a larger premium per month since you’re older and carry a greater risk, and because you have less time (on average) before the eventual happens.
