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Term Life vs Whole Life Insurance: Pros and Cons

Term life and whole life insurance are both insurance policies that allow you to leave money to your beneficiaries after you pass. Term life is a temporary insurance policy that is less expensive, has a higher face amount, is harder to qualify for, and has an expiration date. Whole life insurance builds cash value, costs a little more, does not expire as long as premiums are paid, and is easier to qualify for.





Term Life vs. Whole Life: Quick Comparison

There are some significant differences in term life insurance and whole life insurance. Check out the table below to learn the basic differences.

Term Life Insurance Whole Life Insurance
Best For Best for replacing income or covering large bills (mortgage, car payments, college, retirement, etc.) Best for covering end-of-life expenses (funeral costs, medical bills, etc.)
Coverage Period In-force for a specified period of time (usually 5, 10, 20, or 30 years) Stays in-force for the life of the policyholder as long as premiums are paid
Cost Premiums tend to be lower but will increase when you renew the policy Premiums are slightly higher but won’t increase as long as they are paid
Cash Value None Builds cash value that can be used in the form of a policy loan
Specific Features
  • Death benefit may take longer to pay because of how high the coverage amount is
  • Medical exam is often required to qualify
  • Family health history, medications, lifestyle, etc. may prevent you from qualifying
  • Flexible pay-out options for beneficiaries (lump-sum, installments, etc.)
  • Death benefit can be paid quickly due to low coverage amount
  • Typically no medical exam required, just health questions on the application
  • Most health conditions accepted
  • Fixed pay-out for beneficiary



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Term Life vs. Whole Life Definitions

Shopping for life insurance can be confusing if you’ve never investigated it or haven’t purchased it before. This can be especially true when comparing term and whole life insurance. But while the two types of policies both leave benefits after you’re gone, they are very different.

Understanding these differences is crucial to picking a life insurance policy that’s right for you and your family. Knowing the pros and cons of each will help you make an informed choice and protect what matters most. Let’s look at them now.


What Is Term Life Insurance?

Term insurance covers a fixed span of time – or term – and is generally considered temporary insurance. The term can last as little as one year, and you can scale it from there depending on the provider. The average span of a term life insurance policy is between 10 and 20 years, but the term can also cover someone until they reach a specified age.

These policies generally pay the death benefit if you pass during the term of the policy. But if the policy expires before you pass, the insurer will not pay the death benefit. In other words, when you buy term life insurance, you are only covered for the period of time that you pay the premiums.

If the term of the policy ends before you pass, then the policy typically expires and the insurer won’t pay a death benefit. Fortunately, some term insurance policies are more flexible:

  • Renewable term – A renewable policy typically allows you to renew for a set period of time when the policy expires.
  • Convertible term – A convertible policy typically allows you to convert the insurance to a different plan.

To qualify for term life insurance, you may have to take a medical exam. Medical exams are often  required because the coverage amounts are high. Because term life insurance is straightforward and doesn’t accumulate cash value, the premiums are relatively low (depending on your age and overall health) compared to whole life insurance.

The reason you can find lower premiums for term life insurance policies is that the coverage is only good for a specific period of time. But term life insurance premiums depend on several factors. For instance, they will vary depending on whether you are a smoker or non-smoker, your age, and any pre-existing health conditions you may have.


Term Life Pros & Cons

If you plan to purchase term life insurance, here are some pros and cons to consider:.

Pros Cons
Premiums can be lower, especially when you’re young. It’s only in-force for a period of time and will expire at the end of that period.
Your beneficiaries will receive larger death benefits.

You have to re-qualify when the term runs out if you want your coverage to stay in force.

You may be able to convert it to a different kind of life insurance.

It can be difficult to get coverage if you suffer from a significant health issue.

Premiums will increase every time you renew your policy’s term period.

No cash value.


What Is Whole Life Insurance?

Sometimes called permanent insurance, a whole life insurance policy provides coverage for your entire life as long as you pay the premiums. This type of insurance can accumulate cash value, which builds up in the policy as you pay your premiums. Depending on the provider, you can withdraw a policy’s cash value in the form of a policy loan or apply it toward the policy’s premium. Any unpaid policy loans will be subtracted from the death benefit.

A whole life insurance policy pays death benefits to the primary beneficiary at the time of your death. Unlike term insurance, whole life policies provide coverage for your entire life. As long as the premiums are paid, the policy stays in force until you pass.

Another advantage of whole life insurance is your policy premium will usually be locked in for the life of the policy. That means the policy’s premium will remain the same even as you age as long as premiums are paid. This feature is important because life insurance typically costs more as you get older, and it can be difficult to qualify for as you age. Locking in an affordable premium early on can make a huge difference in your ability to have life insurance as you get older.

If you have health problems, it may be easier to qualify for whole life insurance, depending on the amount of coverage you want. Because the coverage amount is usually smaller for whole life policies, some don’t require a medical exam to qualify. Depending on the provider, you may be able to qualify just by answering health questions on the application. Whole life insurance is often a good life insurance option for seniors.


Whole Life Pros & Cons

If you plan to purchase whole life insurance, here are some pros and cons to consider:

Pros Cons

It builds cash value that can be used in the form of a policy loan.

It’s more expensive than term life insurance.

Coverage can often be issued without a medical exam – just answer health questions on the application.

Coverage amounts typically only go up to $50,000.

It has fixed premiums as long as they are paid.


Cost Comparisons

Here are some examples of term life and whole life insurance premiums*.

Male 10-Year Term Life Insurance ($250,000) vs Whole Life Insurance ($10,000)
Age Term Life Whole Life
50 $27.50 $30
55 $41.80 $35
60 $69.95 $43
65 $109.65 $56
70 $184.04 $74
75 $357.11 $100

*Rates do not reflect any particular insurer.

Female 10-Year Term Life Insurance ($250,000) vs Whole Life Insurance ($10,000)
Age Term Life Whole Life
50 $22.47 $25
55 $33.67 $28
60 $56.33 $33
65 $109.65 $41
70 $182.05 $52
75 $357.11 $72

*Rates do not reflect any particular insurer.


Pros & Cons: Which Policy is Better?

Before you decide whether you should buy term or whole life insurance, first determine your needs and what you want the insurance to do. Are you looking for an insurance policy that protects you and your family from a life event, such as the loss of income from your death, or are you looking for more comprehensive protection?

Answering this question is important because the coverage amount for term and whole life policies can vary greatly based on several factors, such as the policy’s cost and qualification requirements.

If you are looking for something to help cover your final expenses, a specific type of whole life insurance called final expense insurance (also known as burial insurance or funeral insurance) may be best, depending on your age. But if you’re looking to protect your family from a loss of income, a term policy may be better suited.

Term and whole life policies are both options if you’re looking to buy life insurance for parents. Your circumstances and needs will determine which type of life insurance is right for you.

Benefits Term Life Whole Life
Builds cash value no yes
Stable premiums no yes
Long-term coverage no yes
Lower premiums yes no
High coverage amounts yes no
Medical exam to qualify yes no (just health questions on application)


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Here are the answers to some of the most frequently asked questions about term life and whole life insurance.


Should I convert my term life to whole life?

Most term life insurance policies are convertible, which is great news if you want to go from temporary life insurance coverage to permanent coverage. And there are plenty of reasons to do it. For starters, when you convert from temporary insurance to whole life insurance, you will begin building cash value.

It’s also a good idea to convert your policy if your life situation has changed or you retire. For instance, you may have a long-term dependent, such as a child with special needs. Or maybe you’ve always wanted whole life insurance but settled for term because the premiums cost less.


Should I buy both whole life and term life policies?

When you understand the difference between term life and whole life insurance policies, it’s easy to see how it might benefit you to have both types of policies. For instance, term life insurance is only good for a term, but it can help protect your loved ones from large financial obligations if you pass unexpectedly (mortgage, car payments, college, retirement, etc.)

But while term insurance is great for temporary needs, whole life insurance policies are a long-term solution. And they can work together. You can have a temporary policy in place until you’ve raised the kids or paid off your mortgage. And at the same time, you can have a whole life policy, such as burial insurance, to ensure your burial costs and other final expenses are covered.


What happens to term life insurance at the end of the term?

Term life insurance is only temporary, and that means when the term is up, you will no longer have insurance. You can get term life insurance for as little as a year or typically up to 30 years. But when the policy term ends, you will be left without insurance unless you apply for a new policy or convert your term life policy to whole life before the expiration date.


Are whole life insurance policies worth it?

If stability and peace of mind knowing that you will always be covered are important to you, whole life insurance is well worth the extra cost. This is especially true for older people who will have to pay increasing premiums every time their term life insurance policy comes to an end. The older you are, the more your monthly premiums will cost. That means your premiums will go up every time you have to apply for a new policy. On the other hand, whole life policies are good for as long as you make the premium payments. And that means your premium will stay the same the entire life of the policy. Also, if your health declines, it may be difficult to qualify for a term life insurance policy.


Can you cash in term life insurance?

Term life insurance does not build cash value.

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