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A Good Term Life Insurance Policy Cost Much Less Than Whole Life

By Mike Heuer

A good term life insurance policy always will cost a fraction of what a comparable whole life insurance plan will cost, and term life plans are considered by many insurance experts to be the purest form of life insurance sold. That’s because a term life insurance policy provides insurance protection for a set number of years and then simply expires if the named insured outlives the period of time for which life insurance coverage is provided. And term life insurance was the first type of life insurance ever created and sold.

By contrast, a whole life insurance policy must grow cash value over time until its cash value is equal to the death benefit provided, which means the policyholder essentially provides the death benefit as well as insurer profits. During the first three years premiums are paid on a whole life insurance policy, every penny is spent on commissions, fees and other expenses, according to the Insurance Information Institute. But the same is not true of term life plans, which is why many insurance experts consider term life to be the purest form of life insurance.

Term life policies also are much more affordable and easier to purchase than their whole life counterparts. A term life plan will cost on average less than 10 per cent of the cost needed for a whole life plan with the same death benefit. A big reason for the lessened cost is the fact about 99 percent of term life plans do not pay a death benefit due to the fact the named insured typically outlives the term for which coverage is sought. That makes it easy for life insurers to sell term life policies in volume to healthy individuals and spread out the risk among the many policies that do not wind up paying a death benefit.

Getting a term life insurance policy is a very easy process. Consumers to need only submit their age, information on their general health and inform insurers of whether or not they use tobacco products. Insurers then will compare that information to mortality tables that enable life insurers to accurately assess the odds of someone dying while a life insurance policy in in force.

Since the vast majority of term life plans do not pay a death benefit, no health exam is needed from an insurer-approved doctor, and that make term life policies much easier to obtain than whole life insurance, which usually requires a medical exam and other invasive procedures and can take a great deal of time.

Term life rates are incredibly affordable, with a $250,000 death benefit available from many insurers for as little as $15 per month while a whole life policy with the same death benefit would cost between $150 and $200 or more each month. Because term life policies are so much more affordable, many investment advisors suggest buying term life and investing the savings over what would have been spent on whole life for a greater return.