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Step 1
Determine how long you intend to carry the policy. If you only plan to carry it for 10 years or less, term life policies are more advantageous because of lower premiums. If you plan to continue investing in it for the rest of your life, it is better to lock in a premium in whole life insurance.
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Step 2
Consider why you need life insurance. If you are buying it to guarantee your child who goes to college in five years will have the money to pay for it, but you won't need it afterward, term is the better option. If you are purchasing it because you are concerned that when you die, estate taxes will take all of your property that you had intended to leave for your children, you are better off with whole life.
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Step 3
Compare the premiums for term and whole. Term life premiums usually will be lower for the same amount of coverage because the death benefit is only paid if you die within the term, while whole life coverage can continue until your death, so the death benefit is guaranteed to be paid at some point.
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Step 4
Compare the coverage amounts of the policy. Determine how much money those you leave behind would need to cover expenses, and make sure the face value is enough.
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Step 5
Compare the potential for premium changes in the future. Many types of whole life insurance will have fixed premiums or maximum increases for as long as you live, while many term life premiums will increase at a higher rate as you get older.
