Term vs. whole life insurance: Which is right for me? | finder.com
term-vs-whole

Term vs. whole life insurance

We value our editorial independence, basing our comparison results, content and reviews on objective analysis without bias. But we may receive compensation when you click links on our site. Learn more about how we make money from our partners.

Consider the cost, pay out and the amount of time you want coverage.

Term life insurance covers you for a certain amount of time and generally costs less than whole life insurance. However, whole life lasts for your entire life, and as you accumulate cash value, you can use that money to pay your premiums or boost your beneficiary’s payout.

Term vs. whole life

Term life insuranceWhole life insurance
Usually easier to buy
More affordable
Choose how long your policy lasts
Lasts for life
Premium is typically fixed
Includes cash value
May be able to get a policy with no health exam

Compare term and whole life insurance providers

Why we like:

Compare quotes from 16 life insurance companies side by side.

  • Compare multiple providers
  • Calculate how much coverage you need
  • Get a quote in 2 minutes

Why we like: Policygenius

Compare quotes from 16 life insurance companies side by side.

  • Get the coverage amount and term that's right for you.
  • Choose between term or whole life insurance.
  • Easy online application process.
Promoted

What is term life insurance?

Term life insurance covers you for a specified period of time, typically with the option of renewing after that term.

Average terms come in increments of five — for instance, 5, 10, 15, 20, 25 or 30 years. Though you’ll find the rare company offering tailored terms, you likely won’t be able to sign up for a 12-year policy.

Here’s what you should know about term life insurance

  • It offers death benefits only. You’ll pay your premiums and are guaranteed a payout if your die before your term is up. If you outlive your term, you can renew or let it lapse.
  • It’s usually less expensive than whole life insurance. Your insurer is betting you’ll still be alive at the end of the policy term. If that’s the case, it won’t have to pay up. Your insurer saves money and charges you less.
  • You could renew your coverage after your term ends. Check with your provider to see if this is possible. If you renew your coverage, you’ll probably pay a higher premium.
  • You can get term life insurance without a health exam. However, your premiums will probably be higher because your insurer has no information about your health.
  • Your premium may change depending on the type of insurance you buy. There are three types of term life insurance: level term, decreasing term, and annual renewable term insurance.
    Your death benefit will …Cost of your premium
    Level term insuranceStay the same throughout the term.Your premium stays the same throughout the term.
    Decreasing term insuranceDecreases over the term.Premium usually stays the same throughout the term.
    Annual renewable term insuranceStay the same throughout the term.Your premium increases every year.

Guide to term life insurance

What is whole life insurance?

Whole life insurance is a type of permanent life insurance — meaning it gives you lifelong coverage. Like term life insurance, whole life insurance offers death benefits. However, whole life insurance includes an investment account — the cash value component.

What you should know about whole life insurance

  • You usually need to have a health exam.
    Since your insurer will cover you for life, it wants an accurate assessment of your health. Though some insurers offer no-medical-exam policies. Generally those policies come with higher premiums and lower payouts.
  • You can earn cash value. As you pay your premium, a portion of it grows to become your cash value, available to you to withdraw, tax-free.
  • At the beginning, it’ll be more expensive than term life insurance.
    In the long run, however, your beneficiaries are guaranteed a payout.

Guide to whole life insurance

Alternatives to whole life insurance

There are several types of permanent life insurance, including:

  • Variable life insurance
  • Universal life insurance
  • Variable-universal life insurance
  • Survivorship life insurance

Compare term and whole life insurance providers

Name Product Issue Ages Coverage Range Medical Exam Required
20 to 60 years old
$100,000 to $8,000,000
No
Term life insurance with no policy fees and the freedom to cancel anytime. Simple application process that can get you approved for coverage instantly.
20 - 80 years old
$25,000 to $10,000,000
No
Quickly get a quote for coverage with this marketplace, which compares term & whole life insurance policies from 45+ carriers.
18 - 85 years old
$10,000 to $10,000,000+
Depends on provider and policy
Compare quotes from 16 life insurance companies side by side.
21 - 54 years old
$50,000 to $1,000,000
No
Affordable 2-, 10- and 20-year term life insurance policies. Instant quotes and no medical exams.
20 - 85 years old
$100,000 to $1,000,000
Depends on policy
Get a term or whole life insurance quote from Fidelity Life - starting as low as $15/day.
18 - 75 years old
$100,000 to $5,000,000
Depends on provider and policy
Apply for a simple instant-decision policy free of charge. Compare quotes from multiple A-rated carriers.
18 - 80 years old
$50,000 to $25,000,000
Depends on provider and policy
Get a quote within minutes from more than a dozen insurers.

Compare up to 4 providers

Updated June 16th, 2019
Name Product Issue Age Financial Strength Pays Dividends
18 to 85
Varies by provider
Varies by provider
Compare quotes from 16 life insurance companies side by side.
25 to 80
Varies based on provider
Varies based on provider
Quickly get a quote for coverage with this marketplace, which compares term & whole life insurance policies from 45+ carriers.
18 to 80
Varies by provider
Varies by provider
Get a quote within minutes from more than a dozen insurers.
50 to 85
A.M. Best: A-
N/A
Get a term or whole life insurance quote from Fidelity Life - starting as low as $15/day.
18 to 75
Varies by provider
Varies by provider
Apply for a simple instant-decision policy free of charge. Compare quotes from multiple A-rated carriers.
18 to 80
Fitch Ratings Agency: A+
Yes
Affordable life insurance for active duty, reserve, and retired United States military service members. Get a free quote online.

Compare up to 4 providers

Which type of insurance should I buy?

Consider these factors when you’re trying to decide to buy term or whole life insurance:

Consider buying term life insurance if …

  • You’re not ready to lock in your life insurance forever.
    With term life insurance, you can choose how long you want it to last.
  • You want an affordable option right now.
    Term life insurance generally costs less than whole life insurance — at least at the beginning. You might be surprised by the cost, which could be as little as $30 or $40 a month.
  • You want coverage only for the years you’re paying the bills.
    You may not need a large death benefit after your kids are moved out or you’ve paid off your mortgage. Getting term life insurance means you can reevaluate your policy closer to its expiration date.
  • You want a straightforward life insurance policy.
    Term life insurance is relatively easy to understand. Whole life insurance can be more complicated, as you’ll want to evaluate it against other types of permanent life insurance.

Consider buying whole life insurance if …

  • You’re young and healthy, and your family has a history of serious diseases.
    It may be a good idea to lock in your premium while you have no health complications. With a serious illness, your premium will increase significantly.
  • You don’t think you have the discipline to invest on your own.
    A term life policy might save you money, which you can put in your own investments. However, you must grow your funds yourself or hire someone to do it for you. You’ll pay higher average premiums for a whole life policy, but your insurer will take care of the investing.
  • You’re getting close to the age of retirement.
    Many experts recommend considering whole life insurance as you near the age of 50. You may still be healthy and receive lower premiums. As you get older — and potentially develop health conditions — you may pay higher premiums.

Can you own both Term and Whole life insurance?

It’s possible to buy both term and whole life insurance policies simultaneously as you reevaluate your lifestyle and your needs change and you need more coverage. Look out for term policies that give you the option to convert to a whole life insurance policy later if you’re interested in investing the accumulated value.

In the end, there’s no limit to how many life insurance policies you have, as long as you’re able to afford the premiums.

Which policy is more cost effective?

Ultimately, term life insurance is cheaper because you pay for what you need, and it’s set up to end when you don’t need it anymore. A 30-year-old healthy male nonsmoker would pay about $23 a month for a $500,000 policy would cost about $26 a month for a 25-year policy, and about $205 a month for a whole life policy.

Bottom line

Term life insurance can be helpful if you have a solid plan for how you’ll cover your obligations when your policy expires. If you think your premiums may increase significantly in the future, it may be worth spending more on whole life insurance. Find a policy that works best for your future by comparing providers.

Frequently asked questions

Was this content helpful to you? No  Yes

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site