Should I get term life insurance or whole life insurance?
Term life insurance provides coverage over a certain period of time, and does not have an investment component or cash value attached to it. Term life policies are straightforward, cost-effective, and pay a lump sum upon death or Total and Permanent Disability (TPD).
Whole life policies, on the other hand, offer coverage for your whole life-- not just a fixed period of time. They have an investment component and cash value, and this financial bundle makes the premiums more expensive than those of term life policies.
At StashAway, we recommend keeping your investment and protection needs separate; this strategy is usually referred to as “buy term, invest the rest”. Although it may sound tempting to lump investments or cash in an insurance policy, the reality is that the increased premium isn’t worth the extra cost. These days, there are less expensive investment options that make it more cost-effective to keep investments and insurance separate. By purchasing term insurance, you can use the money saved in expensive whole life premiums to invest more effectively. So pay only for the insurance you need, for however long you want, and put the rest to work while maintaining the flexibility for your investments, all at a fraction of a whole life policy premium.