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Term Life Insurance vs. Whole Life Insurance

Licensed Life Insurance Agent/Staff Writer
November 11, 2019

While there are many types of life insurance policies to choose from, two categories you’ll see frequently are term and whole.

Term life insurance applies for a set window of time (like 10, 20, or 30 years). Once this window is up, the policy typically ends. Whole life insurance is around for, well, your whole life. Provided you keep paying the premiums, a whole life policy stays with you until the end.

Term life vs. whole life insurance comparison

Coverage duration?Coverage lasts set time (10,20 or 30 years, etc.)Coverage designed to last a lifetime
Does it expire? Yes, and you likely won't get money back when it doesNo expiration as long as premiums are paid
Can I borrow money?Cannot borrow from policyCan borrow, tax-free
Expensive?InexpensiveMore expensive than term
Complicated?Uncomplicated and easy to understandGenerally more complex

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How much are whole life premiums compared to term life insurance?

Generally, whole life insurance premiums tend to be higher than those of term life insurance. However, it's important to remember that premiums are determined by a lot of personal factors such as age, sex, health, and even insurance providers. Below is an average sampling of premium pricing differences between term and whole life insurance:

Life insurance for a healthy 25-year-old

Rates for male
Death benefit payout
Term (20-year)













Rates for female
Death benefit payout
Term (20-Year)












Sample quotes based on data from a TermLife2Go partner and are for illustration purposes only. Sample rates are monthly premiums. Actual quotes may vary. Data effective 7/12/19.

Life insurance for a healthy 50-year-old

Rates for male
Death benefit payout
Term (20-Year)













Rates for female
Death benefit payout
Term (20-Year)












Sample quotes based on data from a TermLife2Go partner and are for illustration purposes only. Sample rates are monthly premiums. Actual quotes may vary. Data effective 7/12/19.

Why choose one over the other? Which one is better? You may be surprised, but what’s “best” is a hotly debated topic. We’ll discuss the strengths and weaknesses of each and help you make the right decision for your situation.

Term life insurance

Pro HeadingPros
  • Pro BulletInexpensive for the amount of coverage.
  • Pro BulletPolicies are uncomplicated
  • Pro BulletEasy to purchase compared to whole life.
Con Heading Cons
  • Con BulletPolicy ends after term length.
  • Con BulletIf the policy expires, you typically don't get money back
  • Con BulletIf you renew the policy, the premium will likely increase

Term life is a popular choice, and there are good reasons why: it covers your family, spouse, or home when they’re likely to be at their most vulnerable at a relatively low cost. And the younger you are when you get term life insurance, the less expensive it is.

Of course, the biggest downside to term life insurance is that when the policy ends, you typically don’t get any money back.

Who is term life insurance best for?

  • Do you want the cheapest type of life insurance available?
  • Do you want short-term coverage for your dependents highly reliant on your income?
  • Would your family need to sell the house if your paycheck disappeared before the mortgage is paid off?
  • Do you want a policy that doesn’t require a financial calculator to understand?

If you answered “yes” to any of the above questions, a term life insurance policy may be your best bet. In fact, this is the kind of life insurance Dave Ramsey recommends and personally owns.

“I buy term life insurance. That’s it.” Dave Ramsey1

A term policy could be an excellent choice for those who want to ensure their spouse, children, or other dependents are covered financially if an income-earner dies unexpectedly.

If you plan the term right, by the time it ends, the kids should be grown and better able to support themselves. If you are the sole income-earner, you’ll especially want to consider coverage for not only your kids, but your spouse as well.

Term life insurance could also be a great option for couples who have a mortgage and rely on the income of the other spouse to stay in the house. In a situation like this, people normally get a policy that lasts the length of the mortgage and expires when it’s paid off. However, if you get a new mortgage for a new length or amount, you’ll probably want to re-evaluate your term coverage as well.

Term life insurance is also a common solution for business owners who need to provide collateral for a business loan. Typically these policies are required as part of the loan, and they name the bank as the beneficiary.

People who are on the fence about a permanent life insurance policy (but may want one down the road) could also benefit from term life insurance. If this is you, you can get the option to convert your term life insurance to whole life (or another permanent type) down the road with a convertible policy.

The gist—term life could be the ideal option for these people:

  • Anyone with a temporary life insurance need (to cover a mortgage, younger children, spouse, etc.).
  • People who don’t care about cash value.
  • Individuals looking for the cheapest option for life insurance.

Are there different kinds of term life policies?

There are a few types of term life insurance policies to choose from, but they fall into two categories: level or non-level. Level term life insurance is a policy in which premiums and death benefit stay the same throughout the life of the policy. Non-level term life insurance (such as annual renewable term or decreasing term) have premiums that increase or death benefits that decrease over the life of the policy.

What’s best depends on your situation. In general, level term life insurance is an affordable option for families or homeowners whose loved ones have a lot to lose if the worst were to happen–especially sooner rather than later. To see how affordable, see sample rates for term life insurance.

Whole life insurance

Pro HeadingPros
  • Pro BulletCoverage lasts your lifetime.
  • Pro BulletPremiums usually stay the same
  • Pro BulletPolicy accumulates cash value
  • Pro BulletYou can borrow from cash value, tax-free.
  • Pro BulletIt can help you avoid estate taxes.
Con Heading Cons
  • Con BulletWhole life is more expensive
  • Con BulletWhole life is complicated

Whole life insurance coverage is exactly how it sounds: it covers you for your whole life. However, since there’s more to a whole life policy than term, the premiums are far higher.

While part of your whole life premiums go to the death benefit, the rest goes to what’s called a cash value. Cash value is an amount of money built into the policy that accumulates value in a low-interest account. You can borrow against this cash value, tax-free, although there is interest. However, it may be possible to mitigate the interest—if the cash value interest rate is the same or more than the interest you’re being charged, they offset each other, and you can then essentially borrow money interest-free.

The cash value makes whole life insurance a popular option for people who have already maxed out their 401ks or IRAs and want an extra pool of cash to draw from in retirement. It’s basically an additional savings account with tax shelter benefits.

It’s important to keep in mind, however, that if you borrow money from the cash value and don’t repay it, your policy deducts that amount from the death benefit. In other words, money borrowed from the cash value can reduce your beneficiary’s inheritance if you don’t repay it.

Who is whole life insurance best for?

  • Do you like the idea of an extra savings account you can draw from when you retire?
  • Have you ever been concerned about leaving an inheritance for your children?
  • Are you up at night wondering how you’ll be able to divide up your business and give it to your kids without it going under?
  • Does the phrase “estate tax” make your skin crawl or your blood start to boil?

If you answered “yes” to any of these questions, whole life might be up your alley. Whole life is more complex than term life, but the cash value component can come in quite handy.

Having an extra source of cash during retirement is very helpful, especially if you'll otherwise risk needing to draw from market-based funds when the economy is in a downturn. Instead of relying on the stock market, whole life policies give a steady rate of return regardless of the economy. That stability makes whole life a good complement to any market-based retirement funds.

Whole life is also a good option for leaving an inheritance to children.

Other situations to consider when deciding on whole life insurance

Speaking of inheritance, if most of your estate is non-liquid, your children may need to sell off parts of your land or business to pay off the dreaded estate tax. Whole life could be a viable solution to this dilemma.

On the other hand, if that example made no sense to you, you're probably better off choosing term life insurance.

For another example, say you have a business or family farm you wish to keep intact and leave as an inheritance to one of your children. But what if that would cause your other child to inherit  nearly nothing?

In this situation, a whole life policy could be a way to leave an inheritance to everyone. One sibling could receive the death benefit of the policy while the other could inherit the business. It's kind of a "have your cake and eat it too" solution.

Generally, whole life insurance is best for people who have higher incomes or net worth. If that’s you, be sure to look at the top 10 best whole life insurance companies to help you compare.

What types of whole life insurance are there?

Whole life insurance is a type of permanent life insurance, of which there are a few other categories (universal or indexed universal, to name a couple). If you're interested in a policy that’s likely to have a payout, permanent life insurance is probably a category you’ll want to explore—see our types of life insurance article.

Term life vs. whole life: The wrap up

Term life is typically better for people who want affordable coverage in the unlikely event of their earlier-than-expected death, especially during a critical time in life (such as parenting young children, or taking on a larger mortgage). Whole life is good for higher income individuals to consider when they are estate or inheritance planning. It’s also good for those who want an additional savings plan to draw from in retirement.

No matter which policy you’re leaning toward, life insurance can be a solution for the harsh realities of grief. Nobody likes talking about it, but losing someone you love is one of the worst tragedies imaginable. When faced with grief, it's a challenge to get out of bed, let alone go to work and earn a living. With any life insurance policy, you can be confident that your loved one could, at the very least, pay the bills. With an adequate payout, they could even take extended time off work and allow themselves space to grieve their loss.

We’ve discussed two of the most popular policies (term and whole) in this article, but there are others. To learn about others, see our article about types of life insurance. Or, if you’re ready to price life insurance right now, try our simple quoting tool to get a quick estimate.


  1. Dave Ramsey, “Your Friend is an Idiot

Written by
Alex Enabnit
Alex is a licensed life insurance agent who has appeared on Yahoo Finance, HealthPopuli, and Good Morning Arizona. He writes factual, useful, and occasionally amusing articles about life insurance. Believe it or not, he enjoys researching the intricacies of life insurance and helping people choose the best policies for their specific needs—almost as much as he enjoys kayaking and long hikes.