Term Life vs. Whole Life Insurance

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Term Vs. Whole Life Calculator

Using a term vs. whole life insurance calculator can be a helpful tool in making your decision. These calculators allow you to input your personal information and compare the costs and benefits of different policies.

Term vs. Whole Life Insurance

Term Life Insurance

  • Definition: Term life insurance provides coverage for a specific period, like 10, 20, or 30 years.
  • Cost: Generally, it’s more affordable than whole life insurance.
  • Benefits: Pays out a death benefit if the insured person dies within the term.
  • Renewability: Many policies are renewable, but premiums may increase with age.
  • Suitable For: Ideal for those seeking coverage for a specific period, like while raising children or paying off a mortgage.

Whole Life Insurance

  • Definition: Whole life insurance offers coverage for the insured’s entire life.
  • Cost: It’s more expensive due to lifelong coverage and a cash value component.
  • Cash Value: A portion of the premiums goes into a savings account, which grows over time.
  • Borrowing Option: You can borrow against the policy’s cash value.
  • Benefits: Pays a death benefit and can serve as a long-term investment.
  • Suitable For: Best for lifelong coverage and an investment component.

Related Reading: How Long is a Term Life Insurance Policy?

Term Life Insurance Vs. Whole Life Insurance Comparison

FeatureTerm LifeWhole Life
Term Length You choose a term length, based on your needs, between 10 to 40 years.Your coverage will last for your lifetime as long as you keep paying your premium.
Term CostTerm life premiums are usually the cheapest.Whole life insurance premiums are more expensive than term insurance premiums for the same coverage.
Medical ExamYou don’t always need a medical exam.Most of the time, you will need to have a medical exam.
Guaranteed PayoutIf you continue to pay your premiums, you will be guaranteed a payout for your term.If you continue to pay your premiums, your payout will be guaranteed for the policy’s life.
Cash ValueA term life policy does not have a cash value that grows over time.A whole life policy can grow money without being taxed.
Term Life Insurance Vs Whole Life Insurance

Term vs Whole Life Insurance: Pros and Cons

Term Life Insurance Pros

  1. Affordability: Term life is generally less expensive than whole life insurance.
  2. Simplicity: It offers straightforward coverage without complex features.
  3. Flexibility: You can choose the term length that suits your needs.
  4. Convertible: Some policies allow conversion to whole life insurance.

Term Life Insurance Cons

  1. Temporary Coverage: Only covers a specific period and has no value after it expires.
  2. No Cash Value: Doesn’t accumulate any savings or investment component.
  3. Increasing Cost: Premiums can increase substantially upon renewal as you age.

Whole Life Insurance Pros

  1. Lifelong Coverage: Provides a death benefit no matter when you pass away.
  2. Cash Value: Part of your premium builds a cash value that can be borrowed against.
  3. Fixed Premiums: Premiums generally remain the same throughout your life.
  4. Investment Component: The cash value can grow over time, providing a financial resource.

Whole Life Insurance Cons

  1. Higher Cost: Significantly more expensive than term life insurance.
  2. Complexity: More complex due to the investment component and other features.
  3. Lower Returns: The return on the cash value component is often lower compared to other investments.
  4. Inflexibility: Less flexible in terms of adjusting coverage and premiums.

Related Reading: Explore different types of life insurance policies to see what fits your lifestyle.

Exploring Alternatives

Other individual life insurance options are available, such as indexed universal life insurance, variable life insurance, and variable universal life insurance. Each offers a distinct approach to premiums, death benefits, and cash value account features. Hence, it’s vital to research thoroughly or consult with life insurance companies to determine the best fit for your needs.

Indexed Universal Life Insurance and Variable Universal Life Insurance provide more flexibility and potential for higher cash value, albeit with a higher risk, compared to the guaranteed cash value of a whole life policy.

Next Steps

Choosing between term and permanent policy, such as whole life insurance depends on your financial goals, budget, and the period you need coverage for. Term life is cost-effective and suitable for temporary coverage needs, while whole life offers a lifelong safety net and a cash value that grows over time. Understanding these differences is key to making an informed decision. Contact us today for a free quote.

What Is The Difference Between Term And Whole Life Insurance?

Term Vs. Whole Life Insurance Questions

Contact us if you need help comparing Term vs. whole life insurance. The service is free of charge.

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Frequently Asked Questions

What is the difference between term and whole life insurance?

The difference between term and whole life insurance lies in their duration and benefits. Term life insurance provides coverage for a specific period, usually 10-40 years, and pays out a death benefit if the insured passes away during that time. Whole life insurance, on the other hand, offers lifelong coverage and includes a savings component that builds cash value over time.

What is better, Term or whole life?

Term life insurance lasts for a specific amount of time. Whole life insurance lasts for your entire lifetime. Whole life is more expensive than term life insurance, but the coverage is permanent. You will usually need a medical exam for your whole life, but term life does not always require one. Also, term life does not have cash value for savings, but whole life does.

What is the disadvantage of whole life insurance?

One major downside when deciding on whole life insurance is that it costs significantly more than term life policies. In most cases, you can expect your premiums for a whole life policy to be around ten times higher than what you’d pay for similar coverage with term life insurance.

What is the most significant advantage of term life insurance?

The most significant asset of term life insurance is its affordability and short-term coverage. With a low, fixed cost for five to thirty years, this policy provides an ideal safeguard for your loved ones against any financial losses in sudden death. From paying off debts and replacing income to providing childcare costs or funding college tuition, term life insurance offers invaluable peace of mind in knowing that you have taken care of those who are most important to you.

What happens when term life insurance expires?

It’s simple – you won’t get a death benefit. So, you must secure new coverage if someone depends on your financial support. You can opt for permanent insurance or purchase another type of term policy to replace the existing one. Alternatively, fresh coverage may be unnecessary if no one relies financially on you.

What is the best type of life insurance to buy?

If budgeting is paramount, term life insurance could be your go-to. However, your life may offer a more suitable solution if many depend on you. On the other hand, those looking for financial planning and the potential to accrue cash value through their policy should consider universal life as an ideal choice.

What age should I get life insurance?

The earlier, the better! As we age, our likelihood of developing health complications rises. Correspondingly, so do premiums for life insurance policies. For this reason, you’re more likely to get a lower rate if you secure coverage at 20 years old than waiting until 40 or even 60. So don’t put off your protection any longer – take action today and arm yourself with an excellent safety net for tomorrow!

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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