Self-insuring With Term Life Insurance Policies

By Author: Rob Breaks
Total Articles: 4762
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Some people feel that whole life insurance is a better choice of life insurance than a term policy because it has a built in investment. This may be true but the return on that investment is very low compared to most any other form of investment so for that reason it isn’t a great policy. The other thing that many people pitch is that whole life insurance will never expire. This is true but if you plan well enough then you likely wont even need life insurance when the term of your policy ends.

First of all, whole life insurance is a very expensive form of insurance †one of the most expensive in fact. This is mainly due to the investment portion of the premium which will likely pay back a very low return. There are also high commissions on these policies. For a healthy person in their thirties this could mean as much as $250/month on a whole life insurance policy whereas a term policy might only cost $30/month over a 20 year term.

That’s a huge difference and for many people it makes a lot more sense to buy a term policy. The negative part of the term policy is that ...
... after those 20 years it will be expensive to renew your policy †whereas whole life insurance will stay the same. If you invest the rest of that money into better things then you could easily make up a lot of money over that 20 year period. It will take some diligence but the it could mean a lot of money for you in the future.

If your whole policy is costing $220/month more than a term policy that would equal almost $53000. Take a minute and look at that number. If you invested that money in a mutual fund of some kind and it made a growth of 10%, which could be a lot of money. By the time you reach the end of that 20-year term you likely wont need to be insured anymore because you will have saved up enough to protect your beneficiaries †no matter what happens. It will take some diligence on your part to save that money but a little focus and you’ll be on the right track.

This does not even include any money that you might be investing in other areas besides your life insurance. The other positive is that after these 20 years your children will likely have left home and your mortgage may be paid off so it could mean that money could go to your retirement or be given to your children after you die.

If, after those 20 years, you decide to get another term policy you can do that too. It will likely be expensive but it could provide the peace of mind that you are looking for. At that point in time you might not need to take out a large policy because you may have very few expenses in your life. Maybe at that point you only need a ten year policy for $100,000 or $150,000.
About Author:
Kevin Wismer is a author and freelance writer at the life insurance ratings website LifeCover.ca. This website specializes in Toronto life insurance and would love to help you in any way.