February 16, 2010

Side by Side Premium Cost Comparison of Term versus Whole

While watching the Suze Orman show the other week they had a call which gave a good comparison of term to whole life life insurance.   There was a caller who had life insurance for himself and his wife.  The man had a 30 year term policy and the woman had a whole life policy.   Both policies were for $1 million in coverage.   The woman was 35 years old and the man was 39.   The woman paid $1000 a month and the man paid $100 a month.  

So to sum up:

Man with term : Age 39, Policy 30 year term, Coverage $1M, Monthly cost $100
Woman with whole life : Age 35, Policy = Whole life, Coverage $1M, Monthly cost $1,000

Now its not an exact equal comparison since its a 39 year old man compared to a 35 year old woman.  But their ages are close enough that I think its pretty similar. 

 The same amount of whole life coverage was 10 times as expensive as a 30 year term policy.

I've actually seed this it said before that whole life generally costs 10 times as much as term life.   So here's an example of that.

The annual costs are:
30 year Term Life : $1M coverage = $1200 /year
Whole life : $1M coverage = $12,000 / year

$12,000 a year is a pretty hefty amount to sink into insurance.   Of course you are building cash value so its not as if you're throwing that money away.  But I don't think most families have $12,000 available for such a thing. 

What if you lose your job?   Will you still be able to make $12,000 annual payments to keep the whole life policy?   It would be a lot easier to manage a $1200 payment than a $12000 payment.

One thing I find a bit annoying about trying to compare term life to whole life insurance is the lack of information on whole life available.   It seems if you want to find out how much whole life costs you have to have a consultation with a salesman who is going to try and sell you whole life.   For term life you can easily get quotes online at places like QuickQuote.com.    So anytime I see information on actual costs for a whole life policy I find it useful.


  1. what the term life folks do not tell you is that if anything serious happens to you, you can't renew and that the premiums go up every year. With permanent life insurance, the premiums are level and once they are paid up, you do not need to pay for the rest of your life.

    Question is do you need permanent insurnace? Permanent insurance is needed for certain situations like estate planning, kids with special needs.

    Many folks think that by the time they are 50 years old, they would have one million dollars in the bank so they do not "need permanent insurance". But how many folks actually achieve that?

  2. Mr. Credit Card makes some valid points. I have a term insurance policy but have not seen an increase in the premiums each year. I will do some research, however, just to be sure about the renewal terms. I am certain that he is correct.

  3. During the term of the policy they can not cancel on you. Thats the whole point of having a term for the policy. The quotes for term life that I've seen are 'guaranteed rate'. That means that the rate for the premiums does not change over the term.

    This example is for a couple in their 30's and the term policy is a 30 year policy. So their coverage would last them into their 60's and retirement age.

  4. I don't think you understand these things enough to attempt to mediate a discussion on them. This post is so worthless, I don't even know where to start a critique. The only thing that is clear is that you don't understand.

    Term and whole life both have many optional riders that can affect your premium. GIO, ROP, PUA, to name a few. There is not enough information presented to make a valuable comparison.

    Your aversion to learning about insurance is hurting you, and you talking about it could be hurting others. I would advise you to learn about a subject before you try to form others' opinions on it.


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