Buying Life Insurance in 2024? Be Very Careful With This Type of Policy

Whether you have a spouse, children, or siblings you help support, if there are people in your life who depend on you financially, then it's important to put a life insurance policy in place.

You could opt for a term life insurance policy, which covers you for a preset number of years. Or, you could look at whole life insurance, which not only covers you permanently (meaning, the rest of your life), but also accumulates a cash value you can borrow against or cash out in time.

At first, you might assume that whole life insurance is the better deal. After all, with term life insurance, once your policy runs out on you, you get nothing (except, you know, getting to live). But here's why it may not be.

The cost could be prohibitive

Unless your employer offers it as a benefit, life insurance is probably not something you're going to get for free. But in the context of paying for life insurance, you should know that the cost of whole life insurance could be exorbitant compared to the cost of a term life policy. So even though you may like the idea of perpetual coverage and a policy that accumulates a cash value, the cost may be enough to put a serious dent in your budget.

Policygenius says that a healthy 30-year-old applicant can pay around $26 per month for a 20-year term life insurance policy with a $500,000 payout. By comparison, a whole life policy with the same payout might cost that same applicant $451 per month. That's more than 17 times the cost of term life insurance.

Now, think about your expenses. Chances are, you can squeeze a $26 payment into your monthly bills, especially if you cut back a little bit in certain areas. But finding a way to cover a new $451 bill is another story.

Of course, these figures are just one example. And they're not necessarily representative of the amount you'll pay for life insurance. The point, however, is that the cost of whole life insurance could far exceed the cost of term life. And that's reason alone to opt for the latter.

Whole life insurance also comes with one big risk

As mentioned earlier, life insurance generally isn't free. You have to keep paying your premiums to maintain your coverage. If you stop paying those premiums, guess what happens? Eventually, your policy could lapse.

In some cases, with whole life insurance, you might eventually get to the point where your policy has enough of a cash value that your premiums can be taken from it. In that case, you could avoid losing your coverage even if you stop paying for it.

But generally speaking, not paying your life insurance premiums means running the risk of losing your coverage and having to start all over again. And that risk may be much higher with whole life insurance due to the higher cost.

Putting life insurance in place could be one of the smartest moves you make in 2024. But be careful if you're looking at whole life insurance. It might seem like a great deal, but in reality, it could end up being disastrous.