Term and whole life insurance both pay a death benefit, but they're built for different jobs and they differ a lot in price.
How term life works
You pick a coverage amount and a term, such as 20 years. If you die during the term, your beneficiaries receive the death benefit. If you outlive the term, the coverage ends. Many policies can be renewed or converted, usually at a higher price.
How whole life works
Whole life is a type of permanent insurance. Premiums are usually fixed, coverage lasts for your lifetime if premiums are paid, and part of each premium builds a cash value you can borrow against. That combination makes premiums several times higher than term for the same death benefit.
Side-by-side
- Length: term covers a set period; whole life covers your lifetime.
- Cost: term is usually far cheaper per dollar of coverage.
- Cash value: term has none; whole life builds some over time.
- Flexibility: term is simple; whole life includes loans, dividends (on some policies) and surrender rules to understand.
When term often fits
Term often suits people protecting income during working years, such as covering children until they're independent or a mortgage until it's paid off.
When permanent coverage may fit
Permanent coverage can make sense for lifelong needs: a dependent who will always need support, covering estate costs, or when you've already used other tax-advantaged savings options. These are situations to talk through with a licensed professional.
Questions to ask before buying either
- What happens if I miss a payment?
- Can the term policy be converted to permanent coverage later, and until what age?
- For whole life: what are the surrender charges, and what's guaranteed vs. projected?
General information only, not insurance advice and not a recommendation of any insurer or policy. Coverage rules and prices vary by state and by insurer, so confirm details with a licensed agent or your state insurance department.