Since 1994
By the Termco teamLicensed life insurance agents since 1994Updated
The short version
| Term life | Whole life | |
|---|---|---|
| How long it lasts | A set term, commonly 10 to 30 years | Your whole life, as long as premiums are paid |
| Price | Lowest cost per dollar of coverage | Typically many times the cost of term for the same death benefit |
| Cash value | None | Yes, grows slowly on a guaranteed basis (and may earn dividends) |
| Premiums | Level for the term | Level for life (or for a set payment period) |
| Best for | Replacing income, covering a mortgage, kids' years at home | Lifelong needs: estate liquidity, a special-needs dependent, final expenses |
How term life works
You choose a coverage amount and a term. If you die during the term, your beneficiaries receive the death benefit, which is generally income-tax-free. If you outlive the term, the coverage ends (or you can usually keep it at a much higher yearly price). There's no savings component, which is exactly why it's inexpensive: you pay only for the protection.
For a sense of scale, Termco's estimate model puts a $500,000, 20-year term policy for a healthy 35-year-old man at $25.36–$32.67/mo. (Termco estimate, not an insurer quote.)
How whole life works
Whole life is permanent insurance. Part of each premium pays for the insurance and part builds a cash value that grows on a guaranteed schedule. You can borrow against the cash value or surrender the policy for it, though loans reduce the death benefit if not repaid and surrendering ends the coverage. Participating policies from mutual insurers may also pay dividends, which aren't guaranteed.
The trade-off is cost. Because the policy is built to pay out eventually, and to accumulate cash, premiums are far higher than term for the same death benefit. Many families who buy whole life end up with less coverage than they need because that's what fit the budget.
"Buy term and invest the difference"
You'll hear this advice often. The idea: buy affordable term coverage for the years people depend on you, and invest what you would have spent on whole life in a retirement account. It works well for people who actually invest the difference consistently. It doesn't work if the difference gets spent. Whole life's forced-savings structure is a real benefit for some people, but it's an expensive way to save if you have room in a 401(k) or IRA.
When whole life (or other permanent coverage) makes sense
- A dependent who will always need support, such as a child with special needs, often paired with a special-needs trust.
- Estate planning, where a death benefit provides cash to pay estate taxes or equalize an inheritance. This mostly matters for larger estates, including in states with their own estate tax.
- Business needs, such as funding a buy-sell agreement.
- You've maxed out other tax-advantaged savings and value guarantees over growth.
A middle path: convertible term
Many term policies include a conversion privilege: the right to switch some or all of the coverage to a permanent policy later without a new medical exam, within a deadline set by the policy. That lets you buy affordable term now and keep the option open if your needs change, or if your health does. Read more in converting term life to permanent.
Which should you choose?
If your main goal is to protect your family's income, mortgage, and kids' future during your working years, term is almost always the right starting point. If you have a lifelong need, permanent coverage deserves a look, and an honest agent will show you both side by side. Termco focuses on term life: see estimates for your age and health.
About the prices on this page. Every price shown is an example estimate from Termco's own pricing model, the same one behind our quote tool. It's calibrated to typical published term rates from insurers rated A- or better, but it is not a quote from any insurer, not an offer of insurance, and not a guarantee. Your actual rate depends on the insurer and its underwriting of your full application.
See estimates for your age and health
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Frequently asked questions
Is term or whole life insurance better?
Neither is better for everyone. Term is the most affordable way to protect income and debts for a set number of years, which is what most families need. Whole life fits lifelong needs such as estate planning or supporting a dependent who will always need care.
Is whole life insurance a good investment?
Whole life's cash value grows slowly on a guaranteed basis. Its returns are usually lower than long-term stock market investments, but it offers guarantees and forced savings. Most people are better served by maxing out retirement accounts first.
What happens when term life insurance ends?
Coverage stops and no benefit is paid. Many policies let you renew yearly at much higher prices, or convert to permanent coverage before a deadline without a new medical exam.
Can I have both term and whole life?
Yes. Some people combine a large term policy for their working years with a smaller permanent policy for lifelong needs like final expenses.
Related guides
- How Much Life Insurance Do I Need? A Simple Way to Figure It Out
- Can You Get Term Life Insurance Without a Medical Exam?
- What's the Best Term Length for Life Insurance? 10, 20 or 30 Years
- Term Life Insurance for Smokers: Rates, Vaping, Cigars and Quitting
- Term life insurance by state
This page is general information, not medical, legal, tax or underwriting advice. Underwriting decisions are made by each insurer and vary by insurer and individual.