Maybe I just don’t understand what they’re doing. BUt it seems to me if I take out a 10 year policy that costs $100 per month, I’m betting that I’m going to die within that period of time and the company is betting that I won’t or that they won’t have to pay out. If I get to the end of that 10 year term, then I’m just out $12,000. What am I missing?
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When you’re young, whole life insurance is *significantly* more expensive than term life insurance for the same amount. And of course it is… there’s a good chance you’ll never use the term life insurance policy, and a 100% chance you’ll (eventually) use the whole life insurance policy.
So, that $100 per month can buy your family a $100,000 whole life policy, or a $1 million term life policy that expires after 20 years.
Of course if you don’t die in those 20 years, the $100,000 policy is better. But if you do die during those 20 years, your family will get an extra $900,000 to pay off your mortgage, to feed and clothe your kids and send them to college.
In terms of “insurance,” that term life insurance sure makes a lot more sense, no? Or, perhaps you should do both. Spend $50/mo on $50,000 whole life and $50/mo on a 20 year plan for $500,000. That’s probably the best option.
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