Can someone explain term and whole life insurance.?

I have been searching for life insurance I am in my 30's already and have children. I am so confused about term and whole what is the difference and what is the best to purchase given my age.

Whole life insurance is the more traditional policy. You pay the monthly premium every month until you die, then the policy pays out to your beneficiaries. With term life insurance, you only pay your monthly premium for a set term (usually 10, 20, or 30 years). If you are still alive at the end of the term, no money is paid out.
Typically term life makes sense for people who work hazardous jobs and expect to have an increased chance of death during their working years. It also makes sense for someone in your situation with kids because IF god-forbid you die while they're still young, there is money available. Once they get old enough, you don't have to worry about paying for life insurance.
Whole life makes sense for people who want to leave a gift or gifts behind after they die, with less emphasis on someone needing the money should they die.

I have always sold term insurance 100% of the time and also help my clients invest. I believe life insurance with a savings plan in it are complete ripoffs since they really benefit the insurance company more than the consumer. It is always better to keep life insurance and savings apart.

Here are somethings you should know about cash value life insurance.
1) They go under the name of whole life, universal life, variable life, or a mixture of these words together.
2) It only grows tax-deferred because you are losing money on your investment. For example, lets say you paid a total of $10,000 in premiums and the cash value is only $5000. That means you have a loss of $5000 and its not even tax-deductible!
3) Cash value has a low rate of return of 1-4%.
4) If you take money out of the cash value, you have just taken a loan from the cash value and you will owe loan interest of 6 - 8%. If you die someday and there is a loan due, the amount you owe will be deducted from the death benefit.
5) Your beneficiary can't collect the cash value if you die, unless otherwise stated in the policy.
6) You are protected until age 100 as long as the policy is still enforced.
7) Because of the cash value in the life insurance, premiums are said to be very expensive for the average consumer.
8) They are usually never paid up, though check your life policy to see what age when your policy is paid up. It will usually say Life Paid Up at age 98 (or 100).

Here are some things you should know about term insurance:
1) You can buy lots of coverage for the lowest possible cost.
2) Premiums remain low and leveled for as long as 5, 10, 15, 20, 25, 30, or 35 years.
3) No such thing as cash value. You decide where you want to put your money (at a bank, in investments, in your retirement plan such as 401k or an IRA).
4) Changing your life insurance or changing your savings won't affect one another.
5) Many term policies contains provisions to provide coverage to age 100 such as renewable term.
6) After the level term expires, your premiums will go up if you keep the same coverage and the same policy, but you don't need to do the medical underwriting again. There are various options you can take when the level term expires. You can convert it to whole life or another term policy or you can cancel the policy.

Anyway, here is my reason why I always sold term insurance. Right now, you probably have consumer debt, have a mortgage to pay, have kids to support, and you have very little savings. God forbids something happens to you, your family won't be able to maintain the same life style. Since premiums are inexpensive for term insurance, you can afford the right amount of coverage. For a 30 year term policy of $250,000 coverage for a 30 year old, it may only cost $25/month. For whole life, it may probably be between $100-$300/month?

Then I show the client what can happen if he invest $200/month for the next 30 years. If the mutual fund performs 12% on average, he can potentially have $706k. In 35 years, he can potentially have $1.3 million. If this was in a Roth IRA, all the money can be withdrawn tax-free after age 59 1/2.

Then I ask the client how much can he commit to building wealth for his future? It usually ranges from $100-$300/month.

I said before that premiums will go up after the level term. In 30 years, if you built 6-7 figures in your retirement, do you think you will still need life insurance for the rest of your life or as much coverage? As you get older, kids become adults, your mortgage should be paid off, and you shouldn't have too much consumer debt. So the need for life insurance decreases, but you better have lots of money saved.

If you still need life insurance in 30 years, I will find out how much coverage you still need (which is usually much lower). Then I would exchange the policy to a 10 or 20 year term.

The insurance agent above listed the terms correctly, but what he failed to mention is you are going to pay about
600% more monthly on a whole life policy compared to a term life policy.

For most this is the dilemma.
What would you rather do:
Be able to provide your children with a quality education
or
Leave them a pile of money when you die

For the rare few who get sucked into a whole life policy by an agent who will be making ~%60 commissions, the whole life monthly payment will be about half their mortgage.

Term $10-$50 per month
Whole $300-$800 per month

Term is like renting, Whole life is like buying....I would only buy term if you dont plan on leaving a legacy or dont have any dependents. The best way to go in insurance in most cases these days is variable universal life where you get permanent protection , but also more growth in cash value because you have the chance for stock market like returns 8-10% usually. Also the cash value grows tax deferred similar to a Roth IRA in a sense.

Whole-life is a rip-off. Huge sales costs, huge annual fees.

You are FAR better off getting a term-life policy, and investing the difference (between a whole life policy's cost and a term life policy's cost) in a good growth mutual fund.

The only people who will tell you different are the people who sell whole life policies.

Given your age and family situation, term life insurance may be the best option available to you as term would give you the maximum protection at the most affordable cost.

Term Life Insurance vs Permanent Life Insurance. Which Type of Life Insurance Policy Meets Your Needs?

The term versus permanent life insurance debate has been going on for years. Thereâ€™s no one right answer for everyone. Each of us has our own specific needs that life insurance provides for. Both Term and Permanent Life Insurance has advantages and disadvantages. Weâ€™ll address both in our review.

Term life insurance is designed to help people buy life insurance protection they need when they can't afford to purchase all permanent insurance, or when they only need life insurance protection for a specific period of time. Term insurance provides you with a guaranteed death benefit, but no cash value.

The life insurance premiums will increase at pre-determined intervals such as 1 year, 5 years, 10 years or 20 years. This depends on the type of term life policy you select. A term life policy is often the choice when your life insurance protection needs are higher for a period of time, then drop down to lower levels in later years, such as when your family is growing.

Term insurance can also be an effective way to provide supplemental coverage in addition to permanent insurance during years you need higher levels of protection, such as when your family and other financial responsibilities are beyond your current income.

In these situations, term coverage allows you to purchase important death benefit protection without going beyond your budget. Also, if the coverage is convertible (the coverage can be "converted" to a comparable permanent life insurance policy, without the need to provide evidence of insurability), you can get the coverage you need today â€” with the ability to purchase permanent insurance coverage in the future. Get a Free Term Life Insurance Quote.

The Real Cost of Term Life Insurance

However, term insurance has its disadvantages. It isnâ€™t right under all circumstances. Among its drawbacks, be sure to note the following:

You do have to "die to be paid." As unpleasant as that sounds, it's true. Term life insurance provides a death benefit only, for a specific period of time. So, if you outlive your policy period, there is no payout to your beneficiaries. When the term coverage expires, your protection ends, too. And, if you stop paying your life insurance premiums, the coverage ends. Period.

Hereâ€™s an example for you - Let's say you own a $250,000 term life insurance policy. You've kept the coverage in force for twenty years, and the policy expires at midnight on June 30. If you die at 11:59 p.m. on June 30, your beneficiary receives the full $250,000 in death benefit proceeds. However, if you die at 12:01 a.m. on July 1, your beneficiary receives nothing under the term insurance policy, since the policy has expired.

Purchasing term insurance is often compared to renting an apartment. When you rent, you get the full and immediate use of the apartment and all that goes with it, but only for as long as you continue paying your rent. As soon as your lease expires, you must leave your apartment. Even if you rented the apartment for 10 years, you have no "equity" or cash value that belongs to you.

There is the Very Real Risk of becoming uninsurable when the term insurance coverage expires. While many term policies are convertible to permanent insurance coverage, others may not be. And, even if the term policy is convertible, there are time limits. If the policy is allowed to expire, you may be required to re-apply for life insurance coverage, and prove insurability by taking a medical exam. If you are found to be uninsurable at that time, you will be without life insurance coverage.

Since premiums increase at each renewal, the long-term cost of term can be very costly. Many people buy term insurance coverage when they are in their 20s or 30s because it appears more affordable when compared to a cash value or permanent life insurance policy with the same death benefit amount. By the time they're in their 40s or 50s, the coverage seems a little more expensive, as the rate goes up. In their 50s, the cost may be comparable to the cost of permanent coverage. Finally, in their 60s, if not sooner, they may decide to drop the policy â€” not because they no longer need the protection, but because they usually can't afford it. However, the person who paid more for a permanent life insurance policy in their 20s may still be paying the same premium. That's why the term policy's conversion privilege is so important. This valuable feature is usually available in the first few years of the policy, and allows you to convert to permanent insurance without submitting evidence of insurability. Converting to a permanent policy lets you "lock in" a fixed premium, and your life insurance coverage can never be canceled, provided you pay your life insurance premiums.

The Value of Permanent Life Insurance

Cash value or Permanent life insurance is often the best long term solution for many people. The reasons:

Permanent life insurance provides you with lifetime insurance protection, provided you pay your premiums. Usually, once youâ€™ve been approved for coverage, your policy cannot be canceled by the insurer. Regardless of your health, the insurance will remain in force.

Despite higher initial premiums, permanent life insurance can be less expensive than term life insurance in the long run. Many permanent life insurance policies are eligible for dividends, which are not guaranteed, if and when they are declared by the insurance company. Many companies offer the option to apply current and accumulated dividend values towards payment of all or part of your life insurance premiums. If dividend values are sufficient, out-of-pocket premium payments may be reduced after several years, yet coverage continues for your entire life. So, while life insurance premiums must be paid under both, the permanent and term life insurance plans, long-term out-of-pocket cost of permanent insurance may be lower compared to the total cost for a term life insurance policy.

Permanent insurance can eliminate the potential problem of future insurability. Cash value life insurance policies do not expire after a certain period of time. And, some policies contain guaranteed purchase options, which allow you to buy additional life insurance coverage at specified times, regardless of your health.

Cash Value Life Insurance builds cash value within the policy. This amount, part of which is guaranteed under many policies, can be used in the future for any purpose you wish. If you choose, you can borrow cash value for a down payment on a home, to help pay for your children's college education, or to provide income for your retirement. (Note: Borrowing cash value from your permanent life insurance policy requires the payment of loan interest and will affect your total policy values.) Also, if you decide to stop paying premiums and surrender or cancel your permanent insurance policy, the guaranteed policy values are yours.

When purchasing life insurance coverage â€” renewing or converting a term policy â€” look at more than just the premium. Consider the financial rating of the insurance company. Consider your long term goals and needs for protection.

I hope that helps! Best of luck to you.

I do not see things in black or white. There are shades of gray.
You have 3 options
1. Buy term and invest the difference in a mutual fund or better a Roth IRA.
2. If you are not going to save the difference, but you have the money then buy the whole life b/c in 20 years you will have more money it in then you put in.
3. Buy term and whole life and save the difference.

Most people do not save the difference that is why this country has a negative savings rate so whole life does provide 3 nice features savings, protection, and growth. I personally only have a $50,000 whole life b/c I am single. And I save $250.00 / month into non qualified mutual funds.

What do you want it to DO for you? Unless you're sure you're going to need coverage when you're 90, term is most likely to meet your needs.

Term is a set premium, for a limited number of years - 3, 5, 10, 15, or 20. They used to do 30, I don't know if they do that any more. It's pure insurance - you pay ONLY for the insurance.

Whole life sets the premium, you pay the same premium until you're 100. You WAY overpay the first few years, and they set aside some as "cash value" (they will sell that to you as "savings".) After you have 5-10 years of cash value, they will let you BORROW it, and pay the insurance company interest. If you die before you pay it back, they subtract it from your payout. If you die, you don't get any of your cash value - the insurance company keeps it.

The problem is, most people don't "run the numbers". If you're 30 and healthy, $100,000 of term insurance will probably cost you about $150 a year. $100,000 of whole life will cost you $1500 per year. Ten times as much. About 10% of it goes to your cash value - $150. If you bought the term insurance, and paid yourself $150 a year into a savings account, you've got the same savings, at a much cheaper rate.

The tricky part comes when you're 50. If you want to renew the term, it's a lot more expensive for the next 20 years. Like maybe $1,000 a year, or $1500 a year. When you're 70, it might be $4,000 a year. Or maybe they won't offer it at all. Whereas if you bought the whole ife, it's still going to be $1500 at 50, at 70, at 90. It's just if you invest the difference, you're WAY ahead of the game. If you've saved $200,000 over 50 years from life insurance premiums, why do you still need life insurance??

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