Term Life vs. Whole Life: Pros and Cons

Written by David Quilty on July 4, 2014

If you want to protect your family’s financial future in the event that you pass on in an untimely manner, you need to have life insurance. Once you decide to buy life insurance, however, things become a little dicey. The first decision you need to make is whether to buy term life insurance or whole life insurance.

What’s the Difference Between Term Life and Whole Life?

The difference between term life and whole life is fairly straightforward:

With a term life policy, you are covered for a set period of time, often 20 years, but there are policies that range from 10 years to 40 years. You pay premiums for that time, and when the term expires, you can renew, or you are no longer covered.

A whole life policy covers you indefinitely. As long as you keep current with the payments, you are covered, no matter how many years pass.

When deciding which is right for you, it’s important to consider your current situation, as well as your future goals and potential needs.

Advantages of Term Life Insurance

The biggest advantage to term life insurance is that you can get a large amount of coverage at an affordable price. Premiums are generally very low, especially if you purchase a policy when you are young.

Most term life policies will allow you to renew at the end of the term without jumping through a lot of hoops, and without a big boost to the premium. Check with your insurer to see if you can get a renewable policy if that is what you are interested in.

Many people just choose to get a term that will cover them until their dependents are grown up and out of the house. However, even if this is the case, consider your life partner and expenses he or she might have to cover, even if you die during retirement.

Advantages of Whole Life Insurance

The biggest advantage to whole life insurance is that you are covered your entire life. You don’t have to worry about an expiring term and qualifying for coverage when the policy expires. On top of that, your policy usually builds cash value. It’s not a lot of cash value, and if you aren’t careful, some policies can end up with higher premiums in a low-rate environment (universal policies are types of whole life policies known for this).

A whole life policy costs more than a comparable term life policy, so you might not be able to afford a whole life policy if you are just starting out. At least, you might not be able to afford the coverage you want.

My husband and I each have small whole life policies that can cover small expenses later in life, or be redeemed for (a small amount of) cash value later. But our strategy revolves mostly around our term life policies, which are in effect until after our son graduates from college.

For most families, term life is sufficient, but you should consider your own needs before making a decision.


Jul4

If you want to protect your family’s financial future in the event that you pass on in an untimely manner, you need to have life insurance. Once you decide to buy life insurance, however, things become a little dicey. The first decision you need to make is whether to buy term life insurance or whole life insurance.

What’s the Difference Between Term Life and Whole Life?

The difference between term life and whole life is fairly straightforward:

With a term life policy, you are covered for a set period of time, often 20 years, but there are policies that range from 10 years to 40 years. You pay premiums for that time, and when the term expires, you can renew, or you are no longer covered.

A whole life policy covers you indefinitely. As long as you keep current with the payments, you are covered, no matter how many years pass.

When deciding which is right for you, it’s important to consider your current situation, as well as your future goals and potential needs.

Advantages of Term Life Insurance

The biggest advantage to term life insurance is that you can get a large amount of coverage at an affordable price. Premiums are generally very low, especially if you purchase a policy when you are young.

Most term life policies will allow you to renew at the end of the term without jumping through a lot of hoops, and without a big boost to the premium. Check with your insurer to see if you can get a renewable policy if that is what you are interested in.

Many people just choose to get a term that will cover them until their dependents are grown up and out of the house. However, even if this is the case, consider your life partner and expenses he or she might have to cover, even if you die during retirement.

Advantages of Whole Life Insurance

The biggest advantage to whole life insurance is that you are covered your entire life. You don’t have to worry about an expiring term and qualifying for coverage when the policy expires. On top of that, your policy usually builds cash value. It’s not a lot of cash value, and if you aren’t careful, some policies can end up with higher premiums in a low-rate environment (universal policies are types of whole life policies known for this).

A whole life policy costs more than a comparable term life policy, so you might not be able to afford a whole life policy if you are just starting out. At least, you might not be able to afford the coverage you want.

My husband and I each have small whole life policies that can cover small expenses later in life, or be redeemed for (a small amount of) cash value later. But our strategy revolves mostly around our term life policies, which are in effect until after our son graduates from college.

For most families, term life is sufficient, but you should consider your own needs before making a decision.

About David Quilty