Term vs. Whole Life Insurance: An In-Depth Comparison

Shawn Plummer

CEO, The Annuity Expert

Every one of us wishes to secure the future of our loved ones, and life insurance is an essential tool to help us do just that. Yet, the world of life insurance can seem confusing. One of the most common dilemmas people face is understanding the difference between term vs. whole life insurance. It’s crucial to make an informed decision, as each type has its own pros and cons, and your choice can have significant implications for you and your family.

Term Life Vs. Whole Life Insurance

Understanding Term And Whole Life Insurance

Life insurance, at its core, is a contract between you and an insurance company. You pay premiums, and in return, the company promises to provide a death benefit to your beneficiaries if you pass away while the policy is in effect. But not all life insurance is created equal. Let’s dive into term vs. whole life insurance.

Term Life Insurance: The Basics

Term life insurance can be compared to renting a house. You pay for coverage for a certain period (usually 10, 20, or 30 years). Your beneficiaries will get the death benefit if you die within this period. However, if you survive the term, the policy will end. Term life insurance is generally less expensive compared to other options.

Whole Life Insurance: The Basics

Whole life insurance is more akin to buying a home—it’s a lifetime policy that pays a death benefit and accumulates cash value over time. This cash value can be borrowed against or even cashed out during your lifetime. Naturally, these additional features make whole life insurance more expensive than term.

FeatureTerm LifeWhole Life
A term life policy has no cash value that grows over time.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.
PremiumsTerm 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 vs. Whole Life Insurance: Key Differences

While term life insurance provides pure death benefit protection, whole life insurance combines a death benefit with a savings component. Let’s delve deeper into the core differences between term life insurance vs. whole life insurance.


Term life insurance is usually more affordable than whole life insurance. This is mainly because it’s simpler and doesn’t include a cash value component.


As the name suggests, term life insurance covers a specific term, whereas whole life insurance provides lifetime coverage.

Cash Value

Whole life insurance builds cash value over time, a feature absent in term life insurance. This cash value can be borrowed against, providing financial flexibility.

Investment Component

Some types of whole life insurance allow investment in bonds, stocks, and mutual funds. Term insurance doesn’t offer this feature.

Term vs. Whole Life Insurance Pros and Cons

Deciding between term and whole life insurance depends on your unique circumstances, financial goals, and risk tolerance. It’s essential to weigh the pros and cons of term vs. whole life insurance.

Term Life Insurance

Pros of Term Life Insurance:

  • Affordability: Term life insurance is usually less expensive than whole life insurance, making it more accessible.
  • Simplicity: It’s easier to understand as it provides a death benefit for a specific period. There are no cash value components or investment features to consider.
  • Flexibility: You can choose the term length to match your needs. For instance, you might want a term until your mortgage is paid off or your children have finished college.

Cons of Term Life Insurance:

  • Temporary Coverage: It only provides coverage for a specific term. If you outlive the term, you’re no longer covered unless you renew or buy a new policy, which may be more expensive as you age.
  • No Cash Value: Term life insurance doesn’t accumulate any cash value. It’s purely a death benefit.

Whole Life Insurance

Pros of Whole Life Insurance:

  • Lifetime Coverage: As long as you pay your premiums, whole life insurance provides a death benefit for your entire life, giving you long-term peace of mind.
  • Cash Value Accumulation: Whole life policies build up a cash value over time, which can be borrowed against or withdrawn during your lifetime.
  • Fixed Premiums: Premiums for whole life insurance are typically fixed, so they won’t increase with age or health changes.

Cons of Whole Life Insurance:

  • Cost: Whole life insurance is typically more expensive than term life insurance because of the lifetime coverage and cash value component.
  • Less Flexibility: The premiums, death benefit, and savings component are typically fixed and may not be easily adjustable to changes in your financial situation.
  • Complexity: Whole life insurance can be more complex due to its cash value component and potential for dividends or interest.

Whole Life Vs. Term 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 cost and benefits of different policies.

Term And Whole Life Insurance That Doesn’t Require Medical Exams

Life Insurance No Exam
No Medical Exam Life Insurance

Helpful Tip: If you’re looking for a wallet-friendly option to create your comprehensive estate plan, including both living trust and last will and testament documents, we recommend:

Term Vs Whole Life Insurance

Term Life vs. Whole Life vs. Universal Life

Universal life insurance is another type of permanent life insurance worth considering. Like whole life insurance, it provides a death benefit and accumulates cash value. However, it offers more flexibility in premiums and death benefits and has the potential for higher earnings on the savings component.

Term Vs. Whole Life Insurance Conclusion

Choosing between term life insurance and whole life insurance is not a decision to be taken lightly. Both options have their merits, and the right choice depends on your unique needs and circumstances. Remember, life insurance aims to provide financial security for your loved ones. Consider consulting with a financial advisor to ensure you make the best decision for you and your family.

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.

Life Insurance Inquiry

Frequently Asked Questions

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 difference between whole life and term life insurance?

Term life insurance is a simple and inexpensive option that covers them for a certain amount of time, usually 10 to 40 years. Whole life insurance protects you for the rest of your life, including a cash value component that builds over time.

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!

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*Disclosure: Some of the links in this guide may be affiliate links. I may receive a commission at no cost to you if you purchase a policy. It helps us keep the lights on!

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

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

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