Most of you probably already understand the difference between term life insurance and whole life insurance. I really didn't until recently. So, for those of you who are like me, I want to try to explain the difference and the advantages and disadvantages.
Usually, term life insurance rates are much lower. Unless you are very old, term life will fit most families' budgets better. It pays a given amount in the event of your death, regardless when that may happen. Some plans are level, which may cost you more each month but will not increase as you age. Others are variable, which will cost you less when you're younger but will increase as you become more aged.
Whole life insurance, on the other hand, is part life insurance and part investment program. While at the outset this may seem like a good way to force yourself to save money for your retirement years, keep in mind that the investment part depends on the markets, and whether they rise or fall. Also, this insurance can be expensive for people on small or limited budgets. You can get cash value for your insurance if you decide to drop it, but it may very well not be even close to the amount you've spent on it.
Of course, it's up to the individual to decide which is best for them. If you have a large income, you might want to use whole life as a way to plan your estate so that your heirs will receive money that doesn't carry with it the tax burden of simply assigning part of your wealth to them.
