Life
Term vs. whole life insurance, explained without a sales pitch
Term life is simple and inexpensive; whole life lasts for life and costs much more. Here is how to tell which one your family actually needs.
Published
Read time
6 min read
By
Mirela Ybarra
Life insurance comes in two main shapes. Term covers you for a set number of years. Permanent insurance, such as whole life, covers you for life and builds cash value along the way.
Term life
A healthy 35-year-old non-smoker can often buy $500,000 of 20-year term for around $25 a month, and the price is fixed for the whole term. If you outlive it, the coverage ends with no payout, which is the point: it protects the years when people depend on your income.
Whole life
The same $500,000 of whole life can cost ten times as much or more. Part of the premium builds cash value you can borrow against. It can fit estate planning, a business buyout or a lifelong dependent.
Young family or a new mortgage: term usually fits
Estate taxes or a dependent with special needs: look at permanent coverage
Coverage through work: useful, but it usually ends when the job does
The question to ask your agent: how much coverage replaces my income for the years my family needs it, and what would that cost as term and as permanent?
General information, not advice
This guide explains how insurance generally works. Premiums in examples are illustrations, not quotes or offers of coverage. Policy wording differs by carrier and your situation is your own, so talk to a licensed agent before you decide.
