I am a huge fan of term life insurance, and I do not favor whole life insurance or cash value life insurance. For most people, term life insurance is the best option. Very few consumers need permanent life insurance. There are many benefits to term life insurance that make it a great insurance product for people who are looking to protect their income and continue to provide for their families and loved ones in the event of their untimely death.
Term Life Insurance Is Cheap
The best benefit of term life insurance is its price. Term life insurance is incredibly cheap when compared to whole life or cash value life insurance products. Whole life insurance is an insurance policy that remains in place for the beneficiary’s entire life as long as they continue to make premium payments. Cash value insurance policies are very expensive because they have a cash account component that is an investment and grows in value over the life of the insurance policy. Term life insurance is a pure policy with no cash value, and that is why it is significantly cheaper than the whole life version. To give you an example, you can expect to purchase a $100,000 whole life insurance policy for approximately $100 per month. A $500,000 term life insurance policy will cost you about $70 or less per month. You can purchase a significantly larger amount of insurance protection for even smaller premium payments than a cash value policy.
Term Life Insurance Covers What I Need
Term life insurance is simple to understand. There so many different types of cash value insurance policies. Whole life is actually a type of cash value insurance policy. The insurance industry also offers other options such as variable life, universal life, and many others. If you are willing to pay an additional fee on the premiums, you can really have many different types of whole life insurance policies with tons of different options that are available. But, with every different option you chose, your premiums will increase. There is a price to pay for creative insurance options.
You Should Invest Your Money Yourself
Insurance is not an investment. It is not an investment vehicle. It should not be used to earn money. One of the most popular arguments against whole life insurance and in favor of term life insurance is that you can invest the difference yourself and earn a higher rate of return. For many cash value life insurance policies, the cash that you earn inside the policy’s investment options is a very low rate of return and barely keeps up with inflation. If the difference between a cash value policy and term life insurance policy is $50 per month or $600 per year, you could have a nest egg of over $74,000 which would be far greater than the cash value you would have built up over thirty years with a while life or cash value insurance policy.
Term life insurance has a lot of benefits in its favor over whole life or cash value life insurance. Term life insurance is incredibly cheap when compared to its whole life insurance brethren. Not only can you save an incredible sum of money with term life insurance, but now you also are able to select the investment for the difference instead of the insurance company. Term life insurance is an incredibly simple type of policy that provides you and your family with a vast amount of protection.