There seems to be an ongoing battle surrounding the cost of whole-life insurance vs. term-life insurance costs – whether you are 30 and looking for insurance or even if you are 50 years old and need life insurance!
What’s the best? Whole-Life or Term Life for your 30s? Many people say the term is cheap and that the cost of whole-life insurance doesn’t make it worth it.
But who’s right?
Well, the answer is not exactly simple. However, there is one thing that’s certain: as you get older, life insurance becomes more important to you.
You have more things that you need to take care of if something were to happen to you. Paying off your mortgage, your kid’s college savings, and any debt you have can be a burden that you do not want your family to deal with if the unthinkable happens.
Table of Contents
- The Importance of Life Insurance
- Cost of Whole vs Term
- Benefits of Term vs Whole
- How Much Does Term Life Insurance and Whole Life Insurance Cost?
- A Little Bit More About Whole-Life
- Whole-Life Insurance Companies
- Does the Cost of Whole Life Insurance Make It Worth It?
- The Bottom Line – Whole Life vs Term Life
Life insurance is one of the most important purchases you can make in terms of securing your family’s financial security. Finding the right life insurance company and policy can be a long and confusing process. There are countless insurance companies such as Banner, MetLife, and Prudential that offer dozens of policies and coverage amounts. So how do you know which one to buy?
The Importance of Life Insurance
Before deciding on which plan is best for you, everyone must understand why you need life insurance and the disadvantages of not having a policy. The purpose of life insurance is to replace the salary of a loved one and provide for a family that relies on that salary.
You do not want to leave your family burdened under thousands of dollars of debt during this difficult time. Life insurance brings peace of mind, knowing that your family will be taken care of if something were to happen to you or your spouse.
We talk to a lot of families who are buying life insurance AFTER they lost a family member. These applicants have seen how difficult it can be for someone to pass away without insurance in place.
Don’t wait until the loss of a loved one to start shopping for your plan. It’s never too early to get started.
Cost of Whole vs Term
Several factors go into the cost of your life insurance rates.
Age
A younger applicant will have lower costs than an older applicant. The average life insurance rates, including the average whole-life insurance rates, change drastically by age.
Gender
Women have longer life expectancies, so with that, the average costs of life insurance for women tend to be lower than the costs for men.
Health
Your overall health and family history will play a significant role in your monthly insurance costs. Having any chronic illness, diseases, or a family history of conditions, such as searching for life insurance with a history of diabetes, can cause your health insurance costs to go up.
Occupation
What you do for a living can change your monthly premiums. A person who sits behind a desk will pay lower premiums than someone who has a high-risk job.
Residence
The state that you live in will have an impact on your monthly premiums. For instance, Alaska has much higher annual rates than Montana.
Type
The type of policy you get will also drastically affect how much you pay for the insurance coverage. Obviously, the more coverage you buy, the more you will pay every month. The price will also depend on whether you get a whole-life policy or a term policy. If you get a term policy, the price will depend on the length of the term: 10, 20, or 30 years.
Benefits of Term vs Whole
Term Life Insurance can be a great way to protect yourself. Term insurance is a life insurance policy that is only good for a certain term or amount of time, such as 10, 20, 0r 30 years. Term life insurance does not let you borrow against the policy or generate any kind of cash value, unlike whole-life policies.
Term insurance is also the cheapest form of life insurance for these reasons. Since life insurance companies do not have to manage anything for you, this cuts the rate they can offer you on the policy.
Term Insurance is just a great way to protect yourself during the years when you will have major expenses such as a mortgage and kids. When you need a very large death benefit to protect the financial future of your loved ones, a term life insurance policy will help you save money over a permanent policy, but once the term period is over, you will have to purchase another policy that will have much higher rates.
Through the years, term insurance has become the “golden choice” for insurance. You get the most amount of insurance for the least amount of premiums.
How Much Does Term Life Insurance and Whole Life Insurance Cost?
One of the first questions everyone asks when looking for a life insurance policy is, “How much does a life insurance policy cost per month?” or “How much should I be paying for life insurance?” Many people are worried about paying too much for their life insurance coverage. The average life insurance costs between $500 and $1,500 every year, which translates to around $40 to $150 in monthly premiums, depending on the type.
Typically, whole life insurance costs more than term life insurance. The average life insurance rates are greater on whole life insurance policies because they have some type of cash value buildup, and traditional term life insurance policies do not.
To give you an accurate picture of the various costs of premiums, I ran whole life insurance quotes for males and females of different ages, as seen below, using the least expensive plans possible in the whole vs. term comparison.
Comparison Rate Chart of 30-Year $250,000 Whole Life Insurance Vs. Term Life Insurance Policies
| Gender | Age | Term Life | Whole Life |
|---|---|---|---|
| Male | 25 | Banner Life $212.50 | MetLife $1987.50 |
| Male | 30 | Banner Life $225 | MetLife $2395 |
| Male | 35 | Banner Life $252.50 | MetLife $2842.50 |
| Male | 40 | Banner Life $342.50 | MetLife $3440 |
| Female | 25 | SBLI $177.50 | MetLife $1795 |
| Female | 30 | Banner Life $190.00 | MetLife $2137.50 |
| Female | 35 | Banner Life $222.50 | MetLife $2540 |
| Female | 40 | SBLI $277.50 | MetLife $3105 |
While Metlife has good rates for a whole life insurance policy, you can see the difference in the types of life insurance plans. Whole-life policies are drastically more expensive than term policies because of the cash value added. This is one of the major factors in the debate of whole life insurance vs term life insurance and their rate differences.
A Little Bit More About Whole-Life
A whole life policy is a policy that lasts till age 100. A whole life policy also generates a cash value. This same cash value is the basis by which the insurance company will loan to the policy owner. The loan is collateralized by the cash value. The insurance company will not lend the policy owner more than the total cash value. Through the policy loan provision, a policyholder can access the cash value without incurring taxes. This cash value is an excellent option if you are ever in need of a loan because of unexpected emergencies.
This is because policy loans are treated as debt, which is not a taxable distribution. The Insurance company does, however, charge interest on the outstanding policy loan but does not require payments to be made. However, an outstanding policy loan will reduce the overall available cash value, and if death were to occur with an outstanding policy loan, the loan would be paid back via the death benefit proceeds.
Whole life policies are also known as permanent life insurance policies. As mentioned above, because these types of plans include some type of cash value and are generally designed to last until older ages, the whole life insurance rates are more than term life insurance rates.
Whole-Life Insurance Companies
As you get older, the need for a more permanent life insurance plan seems more important. A more permanent policy can help pay for your final expenses past the life of a term policy. For those who can afford it, Whole-Life Insurance is a great way to protect yourself and have cash values that grow every year, especially for younger adults who can afford the higher premiums now to enjoy fixed premiums as they age.
We represent many different insurance companies that specialize, like MetLife, in lowering the average life insurance rates on whole life plans, so complete the Compare Quotes form on this page, and we can get you whole life insurance rates by age, depending on your date of birth.
If you were shopping for a car, would you buy a random car you found on the side of the road without looking at it or shopping around? We hope not!
Why would you do the same with a whole life insurance? It’s an investment that is going to last YOUR WHOLE LIFE!
Unless you love sitting on hold or talking to insurance agents, the idea of gathering those quotes can be mind-numbing. We’re going to assume you don’t think it’s fun, so we did it for you.
Does the Cost of Whole Life Insurance Make It Worth It?
While I’m sure there are situations where whole life insurance makes sense, it’s hard for me to see that for a 30-year-old.
While the cash value of a whole life insurance policy is convenient if you ever face a financial crisis and need a loan, the added cost may not outweigh the convenience. The money that you save on monthly premiums can be invested in other ways that make more sense than accumulating cash value in the whole life policy.
The Bottom Line – Whole Life vs Term Life
In the end, you have to decide which policy works best for you. There is no “one-size-fits-all” option for life insurance. Consider what is most important to you at your age and stage of life. Spend some time receiving quotes from insurance companies for both whole-life and term-life insurance policies.
Regardless of which type of policy you choose, you should not put off buying life insurance any longer. Do not risk letting something happen to you and leaving your family financially stranded. Additionally, remember that every year as you get older, rates for both whole life and term life insurance will continue to increase. Another great reason to complete our Compare Quotes form on the right side of this page and at least check out the average whole life or term life premiums.
Right now, I’m sticking with my term policies, although I am considering an indexed policy as another investment option. Stay tuned for that, but call us if you have any questions about the differences between whole life insurance and term life insurance.
The debate between term life and whole life can be a confusing one. Each applicant needs different protection for their loved ones. It’s difficult to give a blanket answer.
If you have questions about your specific situation and decide which kind is right for you, feel free to ask us. We’ve made it our mission to connect our customers with affordable coverage and arm them with the info they need.
There are people where whole life makes sense. I am a type-1 diabetic. Diagnosed at age 17. Every time I changed jobs, I bought as much whole life as I could afford. Now that I am approaching my mid-50s, trying to get term insurance for a good control T1 diabetic is simply impossible. And certainly not affordable. I have a mix of term and whole life. Both kinds of policies have their place. And for people who are medically uninsurable, whole life at guaranteed issue is the way to go when you can get it.
Thanks for sharing this article! I really appreciate how you have listed all the pros and cons for both group and individual coverage.This is something that can help a lot of people who are looking or are considering getting a disability insurance. But disability insurance can be expensive and sometimes not beneficial for every person. I think people should discuss this with an insurance broker or agent and analyze their condition before buying it. This is something that I did and my agent at IFG Insurance Services really helped me and proposed a joined life and disability insurance plan which really helped cut the premiums had I bought an individual disability insurance plan.
i want to make life insurance
I would like some insight. I am currently spending $175 a month for a $250,000 whole life policy. My boyfriend is concerned that I’m spending WAY too much for insurance and my agent just wanted to make the commission. Please advise.
@Angela Yes, you are spending WAY too much. Please contact us so we can review your options.
Whole life for a 30 year old from New York Life or Northwestern has many uses and should be a part of every young persons portfolio. While it does not make sense to cover their entire life insurance need with whole life, it certainly makes sense for a young person. A $250k term for a 60 year old, if they can qualify, would be well above the cost that someone who planned ahead pays for their whole life policy even after thirty years.
Plus, thirty years of cash growth would be substantial, even in poorly performing policies. Not to mention the death benefit would be considerably larger if they chose paid up additions. So, if it makes sense budget-wise why would you not recommend having permanent coverage in addition to temporary? What does not make sense is recommending anything indexed and how you have made it as a financial planner having no intellect regarding life insurance.
I think you like the commission check that comes with indexed products instead of logical and concise customer-oriented advice.
This one of the most reckless statements involving life insurance that I’ve heard and I can only assume you’re an insurance agent that pushes whole life insurance on unsuspecting individuals. Every young person that I’ve encountered that has been sold whole life insurance 1. Does not have enough term life coverage to begin with and 2. Is not saving nearly enough in their Roth IRA’s or 401k’s.
Why? Because they’re sinking every last dollar they have into their overpriced whole life policy.
I’m 35 years old and there has never been an instance where a whole life policy made sense for me and my family. I have a $2.5m term policy that will take care of my family until I’m 64 and will be self-insured by the time the policy expires. This is the same strategy that I advise to all my clients.
Hmmm….I could say the same to you for pushing whole life insurance over term. To this day, we’ve had only a handful of clients (<5) that have bought indexed insurance and that's because that's what they wanted. 99.95% of our clients buy term life.
The only insurance product that I recommend over anything over is term. I present indexed as an option. I’ve made 10 years as a planner because I present my clients with options and let them decide what’s best for them while never pushing propriety products.
Can you say the same in your less than 3 years experience?
http://www.brightscope.com/financial-planning/advisor/868324/Andrew-Beasley/