Term vs Whole Life Insurance

Christian Worstell
In this article...
  • Life insurance protects survivors from financial ruin, but the options can be confusing. Read this guide to learn more about term vs. whole life insurance plans.

Term life insurance is a type of life insurance that provides coverage for a specific period of time, typically ranging from 10 to 30 years.

Unlike permanent life insurance, which provides coverage for your entire life, term life insurance policies are designed to provide coverage for a set period of time.

Term Life Insurance Explained

One of the key benefits of a term life policy is that it typically has lower premiums than a permanent life insurance policy. This is because term life insurance policies only provide coverage for a set period of time.

A term life policy provides a death benefit to your beneficiaries if you pass away during the term of the policy. This can help provide financial support to your loved ones during a difficult time.

However, it's important to note that once the term of the policy ends, your coverage ends as well. At this point, you may have the option to renew your policy, but you may also face higher premiums due to your age and potential health issues.

Whole Life Insurance Explained

This type of policy offers lifelong coverage and builds cash value over time, making it a popular choice for many. A whole life policy offers:

  • Guaranteed death benefit - your beneficiaries will receive a payout upon your passing, no matter when that occurs.

  • Fixed premiums - you'll pay the same amount each month or year throughout your lifetime, allowing for easy budgeting.

  • Cash value accumulation - part of your premium goes towards building cash value at a fixed interest rate. This can be accessed through loans or withdrawals while still maintaining some level of coverage.

Understanding How Cash Value Accumulates

Cash value growth is an essential aspect of whole life policies. Here's how it works:

  • Your insurer invests a portion of your premium payments into their general account which earns interest at a fixed rate set by them.

  • The longer you hold onto the policy, the more significant this accumulated amount becomes - essentially acting as forced savings with tax-deferred growth potential.

  • You can access this cash value via policy loans, partial surrenders (withdrawals), or even use it to cover future premiums.

Life Insurance Costs

Term and whole life insurance policy premium differences can be based on things like age and health factors.

To compare these two options effectively, we need to look beyond just the premium amounts. Weigh in factors such as potential returns on investment, your financial goals, and how long you'll need coverage for.

  • If temporary protection is what you seek, a term policy might be more cost-effective in the short run due to its lower premiums.

  • If permanent security is needed, a whole-life policy could offer better long-term value despite higher initial costs thanks to its cash-value component.

Converting Term Insurance to Whole Life Insurance

You can actually convert some term policies into a whole-life one without additional medical underwriting through the magic of conversion options.

To start, it's essential to know if your current term policy offers a conversion option.

This feature allows you to switch from temporary protection to lifelong coverage seamlessly while maintaining some level of coverage during the transition process.

  • Built-in savings component: The accumulated cash value serves as an investment opportunity that grows over time at a fixed interest rate.

  • Tax advantages: Apart from providing financial security, converting also comes with potential tax benefits on both death benefit payouts and cash-value growth within certain limits.

Seeking Professional Advice on Life Insurance Options

It's important to note that there are different types of permanent life insurance policies, such as whole life and universal life.

These policies offer different benefits and life premiums, so it's important to speak with a professional to determine which option is best for you.

Ultimately, the decision between term and permanent coverage depends on your individual needs and budget.

By speaking with a qualified professional, you can ensure that you make an informed decision that provides the right amount of insurance coverage for you and your loved ones.


What is the benefit of converting from term to whole life insurance?

The primary benefit of converting from term to whole life insurance is obtaining lifelong coverage and building cash value. Whole life policies provide guaranteed death benefits, level premiums, and accumulate tax-deferred cash value over time, which can be borrowed against or withdrawn for financial needs.

Why do many experts recommend term life insurance over whole life insurance?

Experts often recommend term life insurance because it provides a higher death benefit at a lower cost during the policyholder's most financially vulnerable years. Term policies are more affordable and straightforward compared to whole life policies, making them suitable for individuals with temporary financial obligations like mortgages or raising children.

What is the major negative to term life insurance?

The main drawback of term life insurance is that it only offers coverage for a specific period (e.g., 10, 20, or 30 years). If the policyholder outlives their term policy and still requires coverage afterward, they may face higher premiums due to age-related factors or health changes when purchasing new coverage.

What are the pros and cons of whole and term life insurance?

  • Whole Insurance Pros: Lifelong insurance coverage; guaranteed death benefits; fixed premium rates; accumulates cash value.
  • Whole Insurance Cons: The more expensive option; complex structure.
  • Term Insurance Pros: Lower initial premiums; simplicity in design; customizable terms.
  • Term Insurance Cons: Limited duration of coverage; no cash value accumulation.


Understanding the differences between term and whole life insurance policies is crucial when making decisions about your financial future. Term life insurance offers a savings account for a set period, while whole life insurance provides lifelong coverage with cash value accumulation. Comparing costs and assessing your needs can help you make an informed decision.

Christian Worstell
About the Author

Christian Worstell is a senior Medicare and health insurance writer with HelpAdivsor.com. He is also a licensed health insurance agent. Christian is well-known in the insurance industry for the thousands of educational articles he’s written, helping Americans better understand their health insurance and Medicare coverage.

Christian’s work as a Medicare expert has appeared in several top-tier and trade news outlets including Forbes, MarketWatch, WebMD and Yahoo! Finance.

While at HelpAdvisor, Christian has written hundreds of articles that teach Medicare beneficiaries the best practices for navigating Medicare. His articles are read by thousands of older Americans each month. By better understanding their health care coverage, readers may hopefully learn how to limit their out-of-pocket Medicare spending and access quality medical care.

Christian’s passion for his role stems from his desire to make a difference in the senior community. He strongly believes that the more beneficiaries know about their Medicare coverage, the better their overall health and wellness is as a result.

A current resident of Raleigh, Christian is a graduate of Shippensburg University with a bachelor’s degree in journalism. You can find Christian’s most recent articles in our blog.

If you’re a member of the media looking to connect with Christian, please don’t hesitate to email our public relations team at Mike@MyHelpAdvisor.com.

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