Life Insurance vs Savings Account: Key Differences

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Understanding Life Insurance and How It Works
Term Life Insurance
Permanent Life Insurance
Benefits of Life Insurance
Pays Out a Death Benefit
Term Insurance Is Relatively Low Cost
Cash Value Can Help You Save
Risks of Life Insurance
Cash Value Can Be a Weak Investment Vehicle
Whole Life Insurance Can Be Costly
Term Life Insurance Can be Costly Under Certain Circumstances
Harnessing the Cash Value of Your Life Insurance Policy
Take out a loan that borrows against your policy's cash value when you need money. Let the cash value grow and use it to supplement your income in retirement. Terminate — or “surrender” — your policy and receive the entire cash value (minus surrender fees).
Understanding Savings Accounts and How They Work
Benefits of Savings Accounts
Earn Interest on Your Deposits
Early Access to Your Money
Freedom to Miss Payments
Downsides of Savings Accounts
Low Returns
Taxes
No Death Benefit
Savings Account vs Life Insurance Account
Do I Still Need Life Insurance When I Already Have Good Savings?
Can You Combine Both Accounts?
The Takeaway
Frequently Asked Questions
Photo credit: iStock/FreshSplash
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About the Author
Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.
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