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Term vs. whole life insurance

Wondering about the term vs. whole life insurance pros and cons? While term life insurance and whole life insurance both often come with a tax-free cash payment to help protect your family financially, they each offer different advantages for different coverage needs. If you’re weighing the pros and cons of term life insurance and whole life insurance, here’s a closer look at how each option works.

Term vs. whole life insurance

Wondering about the term vs. whole life insurance pros and cons? While term life insurance and whole life insurance both often come with a tax-free cash payment to help protect your family financially, they each offer different advantages for different coverage needs. If you’re weighing the pros and cons of term life insurance and whole life insurance, here’s a closer look at how each option works.

Understanding term life insurance

With term life insurance, you get to choose how long the policy lasts. Generally, premiums are guaranteed to be level for a set period of time, and then may increase after that time. That means you can cover financial obligations for a certain period, like while you’re paying off a mortgage or have children who depend on your income. You can also choose from a variety of coverage amounts and monthly premium options, and the premiums are typically more affordable for term life insurance vs. whole life.

If your term life insurance policy is still active when you die, the death benefit will go to your beneficiary or the person or people you choose to receive those benefits. These can be used for day-to-day living expenses, credit card debt, mortgage payments, or any other financial obligations. However, if you live past your policy term, then your policy simply expires and you stop making payments. In some cases, you may be able to renew your term life insurance if you need more coverage.

Understanding whole life insurance

The benefits of whole life insurance vs. term are just as the name suggests. Whole life, which is a type of permanent life insurance, offers lifelong protection. As long as you pay your premiums for whole life insurance, your family or loved ones receive a tax-free lump cash payment after you die.

Whole life policies have the added benefit of having a cash value that grows over time. This cash value is tax-deferred, which means you generally don’t have to pay taxes until you access it. If you decide that you no longer need life insurance and end your policy, any cash value you’ve earned is now yours. You may also be able to borrow from the cash value during your lifetime.

Benefits of term life vs. wholelife

Term LifeWhole Life
LENGTH OF COVERAGEYou choose a term length (10, 15, 20, 30 years) based on your needs.Your coverage lasts your lifetime, as long as you pay your premium.
PREMIUMSPlans are a flexible, affordable way to get coverage exactly when you need it.You may pay a higher premium, but this is a permanent solution for lifetime coverage.
MEDICAL EXAMA medical exam is not always required.A medical exam is usually required — but not with Fidelity Life.
CASH VALUEA term life policy does not build a cash value.A whole life policy can build tax-deferred cash value.
POLICY OPTIONSSome term policies let you increase or decrease your coverage and premiums over time to meet your family’s evolving financial needs.Whole life insurance helps prepare you for end-of-life expenses and allows you to pass on an inheritance to your family and loved ones.

LENGTH OF COVERAGE

  • Term Life

    You choose a term length (10, 15, 20, 30 years) based on your needs.

  • Whole Life

    Your coverage lasts your lifetime, as long as you pay your premium.

PREMIUMS

  • Term Life

    Plans are a flexible, affordable way to get coverage exactly when you need it.

  • Whole Life

    You may pay a higher premium, but this is a permanent solution for lifetime coverage.

MEDICAL EXAM

  • Term Life

    A medical exam is not always required.

  • Whole Life

    A medical exam is usually required — but not with Fidelity Life.

CASH VALUE

  • Term Life

    A term life policy does not build a cash value.

  • Whole Life

    A whole life policy can build tax-deferred cash value.

POLICY OPTIONS

  • Term Life

    Some term policies let you increase or decrease your coverage and premiums over time to meet your family’s evolving financial needs.

  • Whole Life

    Whole life insurance helps prepare you for end-of-life expenses and allows you to pass on an inheritance to your family and loved ones.

Cost of term vs. whole life insurance

It’s no secret that whole life insurance costs more than term life. Since whole life plans offer lifelong protection and come with a cash value component, premiums tend to be much higher than term life. That said, if you’re comparing the term vs. whole life insurance cost, there are a few factors to keep in mind that will influence the price you’ll pay for any policy.

Your age and gender: The longer your life expectancy may be, the less you’ll have to pay for whole life insurance. That’s why whole and term life insurance becomes more expensive as you get older. Similarly, you may pay less for your life insurance if you’re a female since females tend to have a longer life expectancy.

Your health: When you buy a life insurance policy, you’ll typically undergo an underwriting process where the insurance company examines your medical records. If you’re healthy, then you’ll typically pay less than someone who is not healthy. For example, an ultramarathon runner can generally expect lower premiums than someone who’s a smoker. If there are any major blips in your health history, such chronic illness, you may pay significantly more or only qualify for certain plans.

Term length: The shorter your term length, generally, the less you’ll pay for life insurance. This is another benefit of having term life insurance: You only pay for the policy period that you’re purchasing. With whole life insurance, you’re paying for insurance for your entire lifetime, so the premiums for these plans are much higher than term life.

Coverage amount: Whether you’re buying term or whole life, a higher payout to your beneficiary means paying more now in premiums. For example, a $500,000 payout will come at a higher cost than a $250,000 payout. Depending on your age, though, the differences in many of these tiers are typically small, though they do add up.

Tips for saving on term vs. whole life coverage

  • Consider term life first: If you just need temporary coverage, it’s always more affordable to buy term life insurance. The shorter your policy period, the lower the rates.
  • Buy only what you need: Choose the term that will protect you best. For example, choose a 10-year term if your youngest child will be attending college soon and your mortgage is almost paid off. If your term policy expires and you have to renew or buy a policy, it will be much more expensive. 
  • Buy the right amount: Buy the coverage that you know you’ll need. For example, final expense life insurance has low coverage premiums that make it relatively affordable for people who need to cover impending funeral expenses.
  • Shop around for rates: Make sure you’re getting a competitive market rate for your policy. Every carrier prices their policies a little differently, so you may be a better fit for one type of plan vs. another. Comparing a few quotes provides peace of mind that you’re getting the best deal for your policy.

Term vs. whole life insurance pros and cons

You may have heard that life insurance is cheaper when you’re younger, which is true. But not many young people think about buying life insurance. On the other end of the spectrum, many people who are older wonder if it’s worth getting life insurance at all. So, what kind of insurance do you really need at each age? Is term or whole life insurance better for seniors?

Here’s what to consider when weighing the life insurance pros and cons between term and whole life insurance at different stages – and ages – of your life.

Is term or whole life insurance better for me?

So, which is better: term or whole life insurance? Are you and your family trying to weigh the pros and cons of each? Here’s what to consider when it comes to selecting the best policy.

Term life insurance is likely the best choice if you:

  • Want the most affordable coverage. If budget is a factor, term life costs significantly less than whole life. That’s why it’s the most popular choice and best fit for most families. With eFinancial, a 30-year-old man can get a $250,000 policy for only around $13 a month.
  • Need coverage for a set period of time. Raising a family, paying a mortgage, managing credit card debt, or preparing to send a child to college are all times when your family needs some extra financial protection, and that’s what term life is for: to cover your family when it counts. With term lengths ranging from 10 to 30 years, you can match the term to how long you’ll need it. Just like with home or car insurers, you pay for coverage and hope you won’t have to use it.

For most people, term life insurance is the best way to go because it’s affordable, easy to understand, and flexible. In some cases, though, whole life insurance could be a better fit when considering the term vs. whole life insurance pros and cons. Whole life insurance, like universal life insurance, is a type of permanent policy. Consider whole life if you:

  • Have lifelong financial needs. In some cases, you may need permanent financial protection, like if you’re providing for a child with disabilities or want to leave a legacy behind for your family. As long as you continue to pay your premiums, whole life insurance will last your entire life, which ensures a payout for your family when you die.
  • Want an extra source of cash, and you don’t mind paying extra for it. Whole life builds cash value over time, which you can borrow from or use as collateral for a loan. Additionally, some people want this as an extra source of savings. That’s part of the reason both whole life and universal life cost more than term life, and you’ll want to consider whether the extra cash is worth the extra monthly cost. If you’re not currently maxing out 401(k) or other savings vehicles, you’ll likely want to start there first.

Term and whole life insurance through eFinancial

At eFinancial, our goal is to make buying term or whole life insurance as easy, convenient, and affordable as possible. We offer a variety of term and whole life insurance products from top-rated insurance companies, and our agents are here to walk you through your options.

We’re committed to getting to know you and your situation, so we can support you during every step of the process and get you covered as quickly as possible. We look forward to helping you.

Get your quote online, or talk to one of our agents at 833-795-0513833-795-0513.

EDITORIAL DISCLOSURE

At eFinancial, our goal is to make life insurance simple, affordable, and understandable for everyday families. This content is intended for educational purposes only. Each post is carefully fact-checked, reviewed and updated regularly to ensure the information is as relevant as possible.