My Husband Has a $1 Million Life Insurance Policy. Here's Why I'm Not Happy With It

The type of life insurance a person has can make a big difference.

My husband has had a large life insurance policy in place since we got married. I will receive the death benefit if something happens. Since the policy provides for $1 million in coverage, I have the peace of mind of knowing that our family, including our children, will be taken care of financially in the event of tragedy.

Despite the fact that I appreciate my husband's efforts to make sure our family is provided for, I'm not actually thrilled with the coverage he has. And there's a very important reason why that is the case.

This is why I don't like my husband's life insurance policy

The big reason why I don't like my husband's life insurance policy is because of the kind of policy he selected. Specifically, he has a whole life policy. A whole life policy provides coverage indefinitely, as opposed to a term life policy that offers coverage for a limited period of time such as 20 years or 30 years.

My husband did not purchase a whole life policy because we have a need for lifetime coverage. We don't, as we are saving diligently for retirement and for our kids' education, and someday no one will be depending on his income and we will have all of our debts paid down so a death benefit won't be necessary to help our family out far into the future. If we did need ongoing support, then it would be a different story as whole life policies can make sense in this situation.

Instead, my husband bought the whole life policy because he believes doing so is a good way to invest. Whole life policies do have an investment component, and some of the money can be accessed tax free, so he thinks that buying whole life coverage is a good way to be prepared for retirement.

The issue is, though, that I know whole life policies are much more expensive than term life coverage -- and that it's typically possible to get a better return on investment from other investments rather than life insurance.

We end up paying a lot more money for his whole life policy than we would if he had a comparable term life policy that offered the same death benefit but paid out only if he dies at a younger age when we need the money. And we'll end up with less cash over time than if he bought the cheaper term life policy and invested the difference.

Unfortunately, my husband won't be convinced of the downsides of his policy and it's not worth a big money fight since we tend to be on the same page about a lot of other financial decisions.

Buying the right type of insurance offers protection with affordable premiums

Ultimately, it's important to have life insurance protection in place. Buying the right type of coverage that makes sense is ideal, but it can be better to have the "wrong" coverage rather than none at all, which could create a disaster for loved ones.

Still, a term life policy is the better option for most people due to the lower costs. Anyone who is thinking about whole life insurance should be sure to consider the downsides before making their choice.