Term vs Whole Life Insurance in Massachusetts

Term life insurance typically costs 5 to 15 times less than whole life insurance for the same death benefit. For example, a healthy 35-year-old might pay $30-50 per month for a $500,000 20-year term policy, versus $300-500 per month for the same amount of whole life coverage.

Most financial advisors recommend "buying term and investing the difference" because the cash value component of whole life grows slowly (typically 1-3% annually) and carries high fees. However, whole life can make sense for estate planning, guaranteed insurability, or supplementing retirement income in specific situations.

A common guideline is 10-15 times your annual income. In Massachusetts, also consider your mortgage balance, cost of living, number of dependents, existing savings, and spouse income. If you own a home at the Massachusetts median price, factor in the remaining mortgage balance as part of your coverage needs.

Life insurance death benefits are generally not subject to federal or state income tax, including in Massachusetts. However, if the policy is part of a large estate, it may be subject to estate taxes. Cash value withdrawals and loans from whole life policies may have tax implications depending on the amount and your basis in the policy.