Is Term Life Insurance Better Than Whole Life Insurance?

SUMMARY

In this video, Dave answers Ray’s question from Facebook. Ray asks, “Why term life insurance instead of whole life insurance? What is the difference?”

Term life insurance is just like any other insurance. You pay for insurance, and your beneficiary gets your money if you die. Cash value insurance, however, doubles as an insurance policy and an investment vehicle.

Say your term life policy costs $5. The same amount of coverage for whole life would cost you $100: $5 for the insurance and a $95 premium. That’s 20 times more expensive for the same amount of insurance!

Let’s say you want to close your whole life policy. Not only is the rate of return on your money so low that it won’t even allow for growth, but you could even have to borrow your own money that you paid and then pay interest to the insurance company. Additionally, when you die, your beneficiary will receive the face value of your policy, but all the cash you saved up is kept with the insurance company. It's one of the worst financial products in the world!

Dave always recommends term life insurance. Get 10–12 times your income and cover the ones you love.

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[hw]

I had made the fatal mistake of investing into a whole life policy. As I soared to look at the money out in vs the money earned I saw I was -4K in the hole with cash value at $6700k. I just told my agent who posed as a friend that I want out. He tried to convince me but after seeing this video two days ago my mind was made up. Thanks Dave for the advice.

Dave is RIGHT! based on cash outflow, term life insurance is the BEST priced form of death benefit. In a 20 year period you simply pay SO MUCH LESS for term insurance. AND a ton of insurance agents sell them for commissions....


Here is what Dave never talks about: Using the chassis of a life insurance contract to replicate the FIXED INCOME component of your portfolio. Whole life policies are NOT investments. They are however, IF funded correctly AND with only LESS THAN A HANDFUL of insurance companies are absolutely an asset. They should NOT be compared to equity based dollars but have the capacity to certainly hold their grounds as an alternative to fixed income and cash alternative portfolios.
The death benefit of whole life is almost a byproduct at that point!

[HonestFinance]

Yes it is. Term is the right way to go. Dave opened me up 15 years ago to insurance. Thank you.

[harrison]

I can't wait for Dave to discover pizza insurance

[thundergirl]

Hello Sir. Thank you very must for the information. I do have a term life policy. It ends at age 80, what should I do if by some miracle I live to be that age? I am on a fixed SSD income. I am hoping you or someone on this thread can answer my question. Thank you.

[RayFleener]

Dave, thank you for the good description.

[esgee]

I’m a single mother of 3 although one is an adult now. I have thought about this for years but didn’t understand it. Dave explained it well so I am going to do it now. Thanks Dave!

[AlexWinkler]

Made a video about this, I call Whole Life my "$30k Mistake"

[Trevonious]

Can I get term life insurance for parent that has asked me?

[eatpigsnot]

is term insurance better than whole life insurance? is Toronto north of Miami?

[sappysamurai]

Agents who sell this do not care about you. They know all this.

[deepashamusic]

What if you, for example are 30 yo and buy a term life insurance for 30 years and you don’t die in those 30 years? Does the accumulated money just go to waste or it just stops accumulating after the term but your beneficiary gets paid out whatever was accumulated in those 30 years? Thanks

[waynejamel]

Smart... the idea of having a plan that is 10x ur income so that the interest would cover your family

[nrenoll]

My husband and I have had whole life policies for almost 20 years. Now that we're both 40 with medical issues, if we cash out and switch to term policies, it would cost us the same monthly premium. Does anyone have a suggestion of what to do in this case?

[Redcuptalks]

What company do y’all recommend ? I was looking into AIG or Lincoln

[midastouch]

So what happens when the 30 years is up? Do you renew the plan or what?

[oliviaesqui]

It's amazingy to discovered all what ir is.

[sexyredapple]

U do get money on term. I have critical illness on mines.

[MrOccyc]

I was conned by my financial advisor to get a whole life policy. That lasted about 15 months when I started listening to D. Ramsey. I should have known better because it was hard getting actual data about the policy.

[Georgeqaws]

dave what about term to 100 policies? It's a permenent insurance, which no savings account.