Should You Buy Term Life or Whole Life Insurance in Your 20s?

Experts say the best time to invest in certain financial products is in their 20s. Life insurance is one such product. It is not an investment in the literal sense but the figurative sense. The premium you pay for your policy is used to build the life cover provided to your loved ones in the event of your demise. There are various life insurance policies, with term and whole life insurance being the most common. Which one is the most suitable for an individual in their 20s? Let us figure it out.

Life Insurance

Difference between term insurance and whole life insurance 

It is essential to understand the primary differences before choosing one. As the name suggests, a term insurance policy provides a life cover for a particular time only, let’s say, for 20 years, 30 years, or even 40 years. If, within this time, you pass away, your family gets the sum assured amount. On the other hand, whole life insurance covers the entire life. Most whole-life plans have a coverage limit of up to 100 years. The premiums for each kind of policy differ quite a bit. A term insurance plan calculator can estimate the tip of a term plan, while a life insurance calculator helps understand the end of a whole life plan.

Buying term insurance vs. whole life insurance in the 20s 

We look at various aspects to understand better which would benefit you in the long run.

  • Your budget for life insurance

If the most significant factor that influences your insurance buying process is the affordability of the premium, then term insurance may be the right choice for you. Term insurance is quite famous for this very reason. Since it only offers coverage for a limited period, its premiums are pretty low. The dividend is highly likely to be even lower when you buy it during your 20s because, as a young individual, you hold very few health risks. The chances of you raising a claim any time soon are significantly less. Hence, the lower premiums.

A whole life insurance policy may have slightly higher premiums to compensate for the lifetime coverage. The premium for an entire life plan for a 25-year-old individual will still be relatively lower than the whole life premium for a 40-year-old individual.

  • Your objective for buying life insurance

Many individuals often buy term insurance only to insure their life for a particular. For instance, some may buy a term insurance plan for a tenure that ends when their daughter’s higher education ends. This ensures the family has the finances to fund the daughter’s education. Even if the primary earning member passes, term insurance may be the right option. Suppose you have any such event coming up, such as a parent’s significant situation.
On the other hand, a whole life insurance policy is usually bought by individuals who want a more hassle-free experience. You can buy the plan immediately with entire life insurance and pay the premiums regularly. There is no worry about the program expiring or ending any time soon.

  • The returns you expect from life insurance.

Unless you have opted for the return to premium feature, a term plan usually offers no maturity benefits. If you outlive the maturity period, the term plan ends.

A whole life insurance plan ensures that your premiums are recompensated by offering coverage for the entire life. Some accurate life plans offer maturity benefits once you cross a specific age limit.

So, which one should you go for? 

According to industry veterans, term insurance in one’s 20s should be the ideal choice for life insurance. The low premiums and the near-sighted approach may be more convenient for a young individual. And when you reach your late 30s or 40s, you can convert your term plan to a whole life insurance plan. The extensive coverage of an entire life plan is perfect for an individual who is well-settled and is looking for convenience and high range over affordability. This way, you also make the most of both life insurance policies. Remember to plan your purchase well if you choose term or whole life insurance. Use tools such as the term insurance plan calculator or the entire life calculator and consult a finance expert before deciding.

Jeffery D. Silvers
Love and share my articles, I will be happy to react on it ! Spent 2002-2009 promoting weed whackers in Edison, NJ. Earned praise for importing junk food for fun and profit. Spent 2001-2006 exporting teddy bears in Atlantic City, NJ. Had some great experience investing in tattoos in Fort Walton Beach, FL. Spent 2002-2007 selling action figures in the aftermarket. Enthusiastic about working on basketballs on the black market.