Posted in Quick Guide to Insurance

Life Insurance 101

Question:  My husband and I are in our late 30’s with 2 kids and are looking at life insurance options.  I noticed that whole life is much more expensive, but the agent is telling me that whole life has a savings plan included that we can borrow against if we need to.  Is whole life or term insurance better?

Answer:  Thank you so much for this question.  I love any opportunity to help people understand about life insurance and to squash the myth about whole life.  First of all, let me address who should have life insurance.  Any adult should have life insurance.  But it is imperative to have life insurance if you have kids or a spouse depending on your income to survive.  The next most important question is how much should I have?  You will want to get about 10 times your annual income on yourself.  If you are a homemaker and do not have an income, you will want to get about $400,000 (equal to $40,000/year income – the cost to hire someone to do what you do).  If based on your age and health, you can get more for very little money, that is ok too.  10 times is the minimum. 

Now the big question.  What kind to I get – term or whole?  The answer is 97% term ( I will explain the 3% in a moment).  Let me explain how whole life works and this should clear it up for you.  You are going to pay at least 10 times more a month for the premium on whole life for less coverage.  The main selling point they have is the savings plan you mentioned.  But it is not a savings plan at all.  It will, as the years go by, build up a cash value in the policy that you can borrow against.  However, when you die, your beneficiary does not receive the savings.  They will only receive the original amount of the policy.  So, therefore, you have wasted the extra money you paid for the policy.  What you want to do is buy 15-25 year (based on your age and the age of your kids) term life insurance.  This is always your best buy.  The 3%, mentioned above, is for people who cannot get term life insurance.  Sometimes, people are uninsurable due to health reasons.  You need some kind of life insurance, so only then do I say get whole or guaranteed life insurance, whatever you can get.

You will want to shop around and find the best rate on term life insurance.  The rates are very low and very competitive right now.  Thank you for your question and thank you for taking care of business.  If you need anything further, contact me at


Debbi is a personal finance expert, motivational speaker, and author of the award winning "The ABC's of Personal Finance", "26 Weeks to Wealth and Financial Freedom" and “50 Shades of Money”. In addition she hosts a worldwide weekly radio show and her advice has been seen in multiple media outlets including NBC News, Forbes, Money, US News, Experian just to name a few. Debbi has also been the President of Lovell Ministries since 2012.

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