Comparing term and whole life insurance is easier with guidance. A licensed advisor can help you choose coverage that fits your goals, budget, and long-term plans.
What Is Term Life Insurance?
Term life insurance is a type of life insurance that provides coverage for a specific period of time, known as a “term.” Common term lengths are 10, 20, or 30 years. If the insured person passes away during the term, the policy pays a death benefit to the beneficiaries. If the term ends and the policyholder is still living, the coverage simply expires unless it is renewed or converted.
One of the main advantages of term life insurance is its lower cost compared to permanent policies. Premiums are typically level, meaning they stay the same throughout the entire term, making budgeting easier. Term life insurance does not build cash value — it is designed purely for protection. Because of its affordability and simplicity, it’s often chosen to cover temporary needs like income replacement, mortgages, or family expenses.
What Is Whole Life Insurance?
Whole life insurance is a type of permanent life insurance that provides lifetime coverage, as long as premiums are paid. Unlike term life insurance, which expires after a set number of years, a whole life policy remains in force for your entire life and pays a death benefit whenever you pass away. This makes it a long-term solution for individuals seeking permanent protection.
Whole life insurance features fixed premiums that never increase and includes a guaranteed cash value component that grows over time. A portion of each premium goes toward building this cash value, which can be accessed through loans or withdrawals. Some whole life policies may also be eligible for dividends, depending on the insurer, which can be used to increase cash value, reduce premiums, or purchase additional coverage. Because of these guarantees, whole life insurance is often used for estate planning, legacy goals, or long-term financial security.
Comparing Term vs Whole Life Insurance
| Feature | Term Life Insurance | Whole Life Insurance |
|---|---|---|
| Cost | Significantly lower premiums | Higher premiums due to lifetime coverage |
| Coverage Duration | Fixed term (10, 20, or 30 years) | Lifetime coverage |
| Cash Value | No cash value | Guaranteed cash value growth |
| Premium Stability | Level premiums during the term | Fixed premiums for life |
| Flexibility | Simple and straightforward | More complex with long-term planning features |
| Complexity | Easy to understand | More complex due to cash value and dividends |
| Ideal Use Cases | Income replacement, mortgage protection, family coverage | Estate planning, legacy goals, lifelong protection |
Protect Against the Unexpected
Cost Differences: Term vs Whole Life Insurance
Cost is often the biggest factor when comparing term and whole life insurance. In general, term life insurance is significantly less expensive because it provides coverage for a set period of time and does not build cash value. Whole life insurance costs more because it offers lifetime coverage, fixed premiums, and guaranteed cash value growth.
| Policy Type | Coverage Amount | Approximate Monthly Cost* |
|---|---|---|
| Term Life (20-year) | $500,000 | $25–$40 |
| Whole Life | $500,000 | $300–$500+ |
*Example assumes a healthy, non-smoking adult. Actual rates vary based on age, health, and insurer.
Cash Value Explained (Whole Life Insurance)
Cash value is a feature of whole life insurance that allows part of your premium to accumulate inside the policy over time. This cash value grows tax-deferred at a guaranteed rate and can increase further through dividends, depending on the insurer. Unlike term life insurance, whole life provides both a death benefit and a long-term savings component.
Policyholders can access cash value through loans or withdrawals. Loans allow you to borrow against the policy without a credit check, while withdrawals permanently reduce the policy’s value. While cash value can provide flexibility and long-term stability, it grows gradually and is best suited for long-term planning — not short-term investing. Understanding how whole life cash value works helps clarify whether cash value life insurance fits your financial goals.
Who Term Life Insurance
Is Best For
Who Whole Life Insurance Is Best For
Term life insurance is often best for people who want affordable coverage to protect temporary financial needs. It’s commonly chosen by parents and families who need income replacement, homeowners looking to cover a mortgage, and business owners protecting loans or short-term obligations. Because term life offers high coverage at a lower cost, it’s especially appealing to budget-focused buyers who want straightforward protection during key working years. For many shoppers asking who should buy term life insurance, the answer is those who need maximum coverage for a specific period of time.
Whole life insurance is typically better suited for individuals with long-term or permanent planning goals. It’s often used for estate planning, legacy creation, or final expense planning, and appeals to high-income individuals who value guaranteed coverage and predictable premiums. Whole life is also attractive to those who want lifelong protection combined with guaranteed cash value growth and long-term financial stability. For people evaluating who should buy whole life insurance, it’s usually those seeking permanent coverage and long-term guarantees rather than the lowest initial cost.
If you’d like personalized guidance, call us at (800) 442-9899 to speak with a licensed advisor or get a quote online to compare your options. There’s no obligation — just clear, straightforward help to make choosing the right life insurance easier.
Term vs Whole Life Insurance: FAQs
What is the difference between term life and whole life insurance?
Term life insurance provides coverage for a specific period (such as 10, 20, or 30 years) and pays a death benefit if you pass away during that term. Whole life insurance provides lifelong coverage and includes a cash value component that grows over time. Term life is focused on affordability, while whole life combines protection with long-term savings.
Which is better: term life or whole life insurance?
Neither is universally better — the right choice depends on your goals. Term life is best for temporary needs like income replacement or mortgages. Whole life is better for lifetime coverage, estate planning, and building cash value. Many people use both as part of a balanced strategy.
Is term life insurance cheaper than whole life insurance?
Yes. Term life insurance is significantly cheaper — often 5 to 10 times less expensive than whole life for the same death benefit. This makes term life a popular choice for families seeking high coverage at a low cost.
Why does whole life insurance cost more?
Whole life costs more because it:
-
Never expires
-
Has guaranteed premiums
-
Builds cash value
-
May pay dividends (with participating policies)
You’re paying for permanent coverage and a built-in savings component.
Does term life insurance build cash value?
No. Term life insurance provides pure protection only and does not accumulate cash value. Once the term ends, coverage stops unless you renew, convert, or buy a new policy.
Does whole life insurance build cash value?
Yes. Whole life insurance builds guaranteed cash value that grows tax-deferred over time. You can borrow against it, use it to help pay premiums, or access it for emergencies or retirement planning.
What happens when a term life insurance policy expires?
When your term ends, you can typically:
-
Let the policy expire
-
Renew it annually at a higher cost
-
Convert it to a permanent policy
-
Purchase a new term policy (if eligible)
Your options depend on the policy and insurer.
Can I convert term life insurance into whole life insurance?
Many term policies include a conversion option, allowing you to switch to whole life or another permanent policy without a medical exam. This is valuable if your health changes during the term.
Who should choose term life insurance?
Term life is ideal for people who:
-
Have children or dependents
-
Need income replacement
-
Have a mortgage or large debts
-
Want maximum coverage for the lowest cost
-
Are on a budget
It’s the most common choice for young families.
Who should choose whole life insurance?
Whole life may be a good fit if you:
-
Want lifetime coverage
-
Need estate planning solutions
-
Want predictable premiums
-
Prefer guaranteed cash value growth
-
Want to leave an inheritance
It’s often used by long-term planners and higher-income individuals.
Can I have both term and whole life insurance?
Yes — and many people do. A common strategy is to use:
-
Term life for large, temporary needs
-
Whole life for permanent protection and savings
This approach balances affordability with long-term security.
Which policy is better for families?
Most families start with term life insurance because it provides high coverage at a low cost during child-rearing years. Some later add whole life for long-term stability and legacy planning.
Which policy is better for retirement planning?
Whole life insurance can supplement retirement planning through:
-
Tax-deferred cash value growth
-
Potential tax-free policy loans
-
Lifetime coverage
Term life does not offer retirement benefits.
What are the main pros and cons of term life insurance?
Pros:
-
Very affordable
-
Simple to understand
-
High coverage amounts
Cons:
-
Coverage expires
-
No cash value
-
Premiums increase if renewed later
What are the main pros and cons of whole life insurance?
Pros:
-
Lifetime coverage
-
Fixed premiums
-
Cash value growth
-
Potential dividends
Cons:
-
Higher cost
-
Slower early cash value growth
-
Less flexibility than some other permanent policies
How do I decide between term and whole life insurance?
Consider:
-
Your budget
-
Your dependents
-
Length of financial obligations
-
Desire for savings or cash value
-
Estate and legacy goals
A licensed advisor can help you compare scenarios and build the right mix.
