Which Is Better, Term or Whole Life Insurance?

Which is better, term or whole life insurance? There is no single answer that’s right for everyone. So if you’re looking for a hard-and-fast answer, we can’t give you one – and we don’t recommend taking the advice of anyone who does. Your financial situation and needs aren’t the same as your neighbor’s or your co-workers, so what’s best for them might not be best for you. We’ll explain what you need to consider and how to pick between term or whole life insurance.

➡️ Want to talk to a real person to figure out whether you need term or whole life insurance? We’re here for you! Call us at (800) 823-4852 and let us help. Or click the button below to get a free quote now!

Get a Free Quote

Is Term Life Insurance Better?

That depends how you define “better.” Term life insurance is the most affordable kind of coverage on the market, so if you’re shopping purely based on price, this is the best you’re going to do. If your budget is stretched to the max, term life is going to be the right choice for you. It doesn’t have all the bells and whistles of whole life, but you’ll stay within your budget. The good news? Many term policies have the option to convert to a permanent (lifelong) policy later, so if you change your mind, you won’t have to reapply.

Let’s look at a few more benefits of term life insurance:

Four kids laying on the grass and laughing, looking up into the camera

Affordability. As we mentioned, you’re not going to find a cheaper policy anywhere – term life is the most affordable type because it doesn’t have the more expensive components (like cash value and lifelong coverage) of whole life. As a result, insurers can afford to give you a price break on this type of coverage.
Lower fees. Because whole life has cash value, it costs the insurer more to provide and maintain. There are fees associated with whole life you won’t find with term life.
Conversion option. Most term policies come with an option to convert into a permanent policy within a certain number of years (usually 5-10). If you take this option, you won’t have to re-apply or retake the medical exam. So if you’re truly on the fence and can’t decide, this is one way to keep your options open for later.
Renewal options. When your term expires, some insurers will let you renew on an annual basis. This is convenient, but it’s also expensive. Every year you renew, you’re now older – and your rates are going to reflect that. Still, if your need for coverage has greatly diminished, it might be easier in the long run to renew for a couple years rather than apply for a new policy.
Living benefits. Show of hands: how many of you think you have to be dead to benefit from your policy? Not anymore. Most insurers will let you dip into the death benefit if you’re diagnosed with a terminal illness. Many offer policy riders (add-ons) for a fee that let you dip into the death benefit if you’re diagnosed with a chronic or critical illness, or need long-term care at any point during your term.
No-exam options. Don’t like needles? Or simply don’t have time to schedule the traditional life insurance medical exam? Not a problem. There are a lot more options now that don’t involve a medical exam at all. Instead, insurers will look at things like your medical records, prescription records, and driver’s record to evaluate how much of a risk you would be to insure. Based on their search, they’ll offer you a rate. That rate may be a little more expensive than what you’d get if you took the medical exam, but it’s a trade-off. We have a lot of clients who just don’t want to both and don’t mind paying a little extra. It’s up to you – but if no-exam is what you want, give us a call at (800) 823-4852 and we’ll help you select and apply for a new policy over the phone!

Get a Free Quote

Is Whole Life Insurance Better?

Again, that depends on how you define “better.” Whole life insurance can’t compete with term life in terms of affordability. But it does have a lot going for it, especially if you’re looking to build a longer-term financial asset. Let’s take a closer look:

A granddaughter helping her grandmother decide between term life and whole life insurance based on her budget

Coverage you can’t outlive. This is huge. Many of our clients ask: what happens if I outlive my term? And we tell them that’s a good thing because it means they’re still alive! But some people really don’t like the idea of paying for coverage they might not use. We get it – if that’s you, whole life may be a better fit for you. As long as you stay current with your payments, you can’t outlive your coverage. The death benefit is 100% income-tax-free and 100% guaranteed.
Cash value. Whole life coverage builds cash value over time. A portion of every payment you make funds your cash value account – think of it like a type of savings account attached to your policy. Your insurer pays a low, flat rate of interest, which compounds tax-deferred over time. Later, you can use that money for anything you like, or even use it to make your payments for you. You can also borrow against your cash value with a private loan from your insurer. For most whole life policies, cash value must be used during the policyholder’s lifetime. Some insurers will let you add it onto the death benefit if you don’t spend it, but not all of them.
Simplest form of permanent coverage. Other types of permanent coverage have different options for growing your cash value – varying interest rates, market indexes, or even investment options. But the simplest form of cash value is what you get with whole life: the low, flat rate of interest is 100% guaranteed, locked in when you buy your policy. If you’re not the type who wants to manage an investment or risk losing any cash value, whole life is simple and easy, without those options or the risks that go along with them.
Living benefits. Like term life, you can also get living benefits with your whole life policy. The terminal illness rider, allowing you to use a portion of your death benefit if you’re diagnosed with a terminal illness, is often free. You’ll also have the option to add other riders; these vary by insurer. Common riders include coverage for chronic illness, critical illness, children, and long-term care.
No-exam options. Also like term life, you can buy a policy without having to take a medical exam. Although you might get a lower rate if you do take the exam, it’s no longer a hard-and-fast requirement. So if you’re afraid of needles, or just don’t want to bother with it, we can find you non-med options that require nothing more than an application.

Get a Free Quote

How to Choose Which Is Better, Term or Whole Life Insurance

Okay, so now you know a little bit more about what each type of coverage offers. But what if you’re still not sure which to choose? Let’s go over a few of the most important points:

Young parents sitting on the floor with their son, helping him put money in a piggy bank, symbolizing the affordability of term life insurance

Term life might be better for you if:

You’re on a tight budget
You have a defined length of time you need coverage (i.e., until your mortgage is paid off, or until your youngest child turns 18)
You don’t mind outliving your term and then being without death benefit protection
You don’t want a complicated policy with extra options or fees

Young couple getting a quote online for whole life insurance

Whole life might be better for you if:

You have a little bit more to spend
You don’t like the idea of outliving your term and then being without coverage – you want a guaranteed death benefit for your loved ones, no matter when you pass away
You want cash value, which is considered a financial asset you can withdraw from or borrow against later in life

➡️ If you still have questions or need help, call us at (800) 823-4852. Unlike most people, we love talking about life insurance – it’s helped our own agents’ families, in so many cases! Ask us about policy types, riders, how to pick an insurer…we’ve seen it all, and we’re happy to share our knowledge so your family can get the protection they need.

Get a Free Quote