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Ask the Life Insurance Expert

Is whole life insurance a good buy?

It can be a good buy if it's a suitable policy geared to your needs, but you might find that term life insurance is a better fit for you. Life insurance decisions are individual--there's not a single right answer for everyone.

The first questions you should ask when considering life insurance are:

  • What type of life insurance do I need?
  • How much coverage should I buy?

Term life covers you for a certain period, such as 10, 15 or 20 years, and provides a death benefit if you die in that time frame. It works well for people who want life insurance to cover mortgage payments, college tuition and other finite financial needs.

Whole life, a form of permanent life insurance, is meant to cover you for your entire life and provides a cash account that grows tax-deferred over time. You can borrow against the cash account; however, any unpaid loans taken against the cash account are deducted from the death benefit your beneficiaries receive.

Whole life insurance includes more benefits, but it's also more expensive than term. If you need life insurance only for a certain number of years, term life is probably the better option. But you should consider whole life if you oversee a family business, want to provide an inheritance to your beneficiaries no matter when you die or you're looking to create an estate.

Insure.com's life insurance calculator helps you analyze your life insurance needs. You answer questions about family debt, college-bound children, inheritance plans and other financial obligations, and the tool provides a quick analysis of whether you need term life or whole life or both, and the amount of coverage you should buy.

For more, see cash value in life insurance: What's it worth to you?

Last updated: Dec. 17, 2010