First what is term life insurance?   Life insurance is contract between a life insurance company and a policy holder that states if premiums are paid over a certain period of time, upon your death, a beneficiary will receive an agreed upon amount settlement.  Term life insurance, in essence is a life insurance policy that is in effect for only a certain amount of time.  Other life insurance policies such as Whole Life are contractual agreements that span your natural life or up until the age of 100.  Whole life insurance policies are considerable more expensive in terms of cost than Term Life Insurance policies.

Insurance is a must to protect your family’s ability to maintain a stable living and survive without your yearly or monthly income.  It is suggested by many financial advisors that a term life insurance policy should payout the approximate value of 10 years of your combined income. Using the 10 year replacement income as a standard, a term life insurance policy will cost less and 1/3 of that of the same whole life insurance policy.

You should be advised that a term life insurance policy is only in effect for a certain period of time, and the coverage is then terminated.  What financial experts suggest is to take the difference between the cost of a term life insurance policy (cheaper) and the cost of a Whole Life insurance policy (more expensive) and apply the difference into an investment vehicle such as the stock market or mutual funds.  The difference between the term life insurance policy and its counterparts can be as much as $1000-$3000 a year based upon the age of the policyholder. 

If you take the term life insurance savings of lets just say $1000 a year and invest that money in the stock market over a period of 25-35 years, the end result could be in many cases be higher than the term life insurance “Face Value” or payout upon the policy holders death.

Many insurance brokers attempt to push a variation of whole life insurance policies upon their customers, not only because of the high commission payouts they receive, but they play into your fears of losing everything and leaving your family in financial ruin.  They rarely tout the benefits of term life insurance unless it is their only true sale.

Whole life insurance does have its own set of benefits. However it should not be used as an investment vehicle, or the only true source of survivor benefits and should only be included as a smaller portion of your full insurance coverage.  Use term life insurance and invest the savings from a more expensive policy, and in the long term, your family and survivors will have more, rather than less.