Term and Whole Life Insurance: Which Is the Better Deal?


Have you ever wondered about what your family would do to make ends meet after you’re gone? It’s a tough thing to think about. After all, no one likes imagining a world without them in it to share in their family’s struggles and successes. However, it’s best to be prepared for every contingency, and that’s where life insurance comes in.

But what kind of life insurance do you need? There are so many options, after all, and it’s a difficult subject to talk about. Let’s take a look at two of the most common forms of life insurance.

Term and Whole Insurance

There are two common forms of life insurance, called term and whole life insurance. They’re similar in that both are insurance policies that pay out to your beneficiaries in the event of your passing. However, they have distinctions that make them each specialized for particular needs.

Term Life Insurance

A term life insurance policy, as the name suggests, covers a person for a set term. That term’s length can vary, depending on the policy, but generally, they’re broken down into ten, twenty, or thirty years. Should the policyholder pass away during the duration of the term, then the policy kicks in, paying out the benefits to the named beneficiary of the agreement.

Term life insurance is ideal for people who want to cover themselves during a period of time during which they will be the main person covering the bills for their family. For instance, a head of household who is 38 years old might consider getting a 30-year term life policy that would pay out enough to cover the family’s expenses in the short term in the event of their untimely passing.

Whole Life Insurance

Again, the hint is in the name: whole life insurance policies cover you for your whole life. Unlike term policies, whole policies don’t expire. While the premiums are often higher for whole life insurance, there are some other benefits. For instance, whole policies accumulate in value and can even pay out dividends to policyholders.

As the policy grows, the taxes on it are deferred. This means you don’t pay taxes on the money in the account until either you surrender the policy for a cash value or the policy cashes out in the event of your passing. Notably, whole life policies are much more expensive than term policies, because a whole life policy will, by definition, pay out eventually. Conversely, most term life insurance policies are strictly “just in case,” and most of them never pay out at all, since the policyholder usually outlives the term.