Why is whole life insurance more expensive than term? Whole life coverage stays in place for the rest of your life. Whereas term life is temporary coverage.
The insurer’s risk of paying the death benefit on the transaction is much higher with whole life insurance. In whole life insurance, the insurer charges more in premium for the simple reason to offset the revenue lost when payout occurs.
Depending on your finances, whole life coverage can be the better option, per a report by the Boston Globe. The policies last longer and also offer investment opportunities, allowing them to build cash savings over time.
“The earnings on cash value can be used to pay the rising cost of insuring your life as you age, since your risk of dying increases with age,” the report says.
These savings can also be used to pay estate tax incurred on large assets, such as family-owned businesses. Most consumers will not have estates large enough to be taxed, and per the Boston Globe report, term-life is the better option.
Term life insurance can offer enough benefit to families without long-term commitments. Coverage will protect a family’s financial well-being until their obligations, such as a mortgage, are paid off. Plus, many term life plans offer renewal opportunities.