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One question that I continually hear from clients, friends, and family is what type of life insurance should I get?  First off, let’s acknowledge that I am not an insurance salesperson and I do not and have never sold insurance.  The following information is based upon my own experience with life insurance and the decisions I have made for myself and my family.

Term life insurance is a life insurance policy for a set amount of time (term), 10 years, 15 years, 20 years, etc.  Term life insurance is significantly cheaper than whole life insurance.  Once the time of the term is up, the policy expires and no benefits are available.

Whole life insurance is insurance that will pay out until you die.  This policy will cost much more per month for less coverage than a term policy.  However, one benefit of this plan that entices people is that after so many years of paying the premium, the cost may go down or away by reinvesting the dividends of the policy.

So, what plan is best for you?  To answer this question you have to know what you want your insurance to cover.  The way I view life insurance is that it is there to take care of people financially who are unable to take care of themselves.  For example, people under the age of 21, who are still in college, etc.  Now, if that is your main goal, then term life insurance may be the right answer for you.  If you take out a 20-year term when your children are young with them as your beneficiaries, it will last all the way through their non-earning years.

Now, if you view insurance as more of a gift for your loved ones at the time of your death, than whole life insurance may be the answer.  Generally speaking, the amount you can afford will be much less compared to a term policy but it will pay out at your time of death regardless of when that happens.   

Truth be told, when I first got married we talked to an insurance sales person and my husband and I took out whole life insurance policies on each other.  However, once children entered the picture and we needed our policy value increased, I did a little more research on the types of insurance and looked more closely at different types of policies. 

Based upon my own research, it seems that a major consensus of financial planners is that term life insurance policy was the best option for me and my family.  After doing a little shopping around for a term policy, I was able to find a policy with four times the payout at a fifth of the cost of the whole life policy I already had.  Therefore, I cancelled my whole life and took out a term life insurance policy.

Additionally, should I take all the savings from the difference in premiums on the two policies and invested it, I would be much better off at the end of twenty years.  Then the question becomes, would you rather have control over your money, or give it to an insurance company so they can save it for you and reap all the benefits? 

Ultimately, the way I viewed the different insurance types was, now I am getting a much bigger payout during the years when my children or family members would need it for a fraction of the cost.  Additionally, if I am saving the difference, my estate will ultimately be bigger at the end of my life than if I were to keep the smaller whole life insurance policy.

Once again, I am in no way an insurance expert or salesman.  I am merely sharing my experience and thoughts with the two different policies I have had over the years.  I implore you to do your own research and check rates every couple of years because they do go down and cheaper rates do become available.