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What’s the better buy: term or whole-life insurance?


First, the basics: Term life insurance covers the policyholder for a specific period, typically up to 30 years. A whole-life policy is permanent – well, as permanent as the policyholder is. As long as premiums continue to be paid, it remains in effect until death, when the beneficiaries are paid. Premiums tend to be lower for term policies because the likelihood of death rises with age; the chances that the policyholder will die are lower during any given year that a term policy is in effect than for any year that a whole-life policy is in effect. Term coverage may also make sense for parents interested in protecting children only until they reach adulthood and, so it’s hoped, they will be able to fend for themselves.
A key benefit of a whole-life policy is that it’s a known quantity. While serial term policies will provide essentially the same coverage as a whole-life policy, the premiums almost certainly will go up with successive renewals. Whole-life premiums typically remain the same. That can make financial planning easier. Also, it’s possible to borrow against the accrued cash value of a whole-life policy, often with a tax break.
-Conrad de Aenlle