Whole life insurance vs. term life insurance was not a part of my vocabulary until I reached my early 30's. The thought of actually dying one day did not ever really cross my mind (as evidenced by some of my riskier activities in my 20's).
In my younger years, I never understood why I should even bother with life insurance. The concept of someone profiting from my death just didn't quite sit well with me. It was only later, as I started to grow my family that I understand the value of the insurance policy. The value was not for "me".
Perhaps this is just a part of growing up, and going through the maturity process. I began to realize that people purchase policies to ensure the security of the loved ones in their life. I started doing some research, and I quickly realized how incredibly complex the subject of whole life insurance vs. term life insurance actually was. There really is no right or wrong answer to this question. Everything "just depends" based on your own circumstances.
Without a crystal ball, some people will make the right choice while others will end up choosing wrong. This is just the nature of the life insurance game. Unfortunately, actuarial science is based on averages. Researchers are paid to create tables to calculate your expect mortality based on various factors (i.e. sex, health, weight, medical history). The problem with this approach is that YOU are not an average, but rather you are simply just "you" : )
Here are the major differences between both whole life and term life policies:
Term life policies: Lower monthly premiums, and can only be "cashed" out upon your death. This policy is similar to a car insurance policy (i.e. if your death occurs outside of the policy dates, there is no payout).
Whole life policies: Higher monthly premium, however the ACV (actual cash value) can be cashed out early. This is a major simplification of "whole-life". There are clauses which will determine the actual amount which can be cashed out at various times. Purchasing your whole life policy is very similar to investing in other financial instruments. You will have to make your own determination with regards to the best use of your monthly premium dollars. There is no right or "wrong" answer, but rather each individual will have their own circumstances.
Whole life insurance vs. term life insurance?
Because of the difference in monthly cost between both policies, you need to make your own determination on the best use of your money. Some financial investors may advocate buying term policies and investing the difference. The theory behind this approach is that you can put yourself ahead by wisely investing the money on your own. Regardless of your final decision, you should consult with a financial planner and life insurance representative. Both individuals will have their own interests on what to do with "your" money. Keep this in mind as you come to your final decision.