Jeff is a well-known speaker and expert in life insurance and financial planning. He has been featured and quoted in Nerdwallet, Bloomberg, Forbes, U.S. News & Money, USA Today, and other leading finance websites. He is a licensed life insurance agent and has helped over 3000 people secure life insurance. He is licensed in all 50 states & DC. Jeff has spoken at top insurance conferen...

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Benjamin Carr was a licensed insurance agent in Georgia and has two years' experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. He is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms — literally on the frontline of journalism.

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Reviewed by Benji Carr
Former Licensed Life Insurance Agent

UPDATED: Nov 2, 2020

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When it comes to life insurance, there is no shortage of options to choose from. The amount of coverage you purchase, the length of your policy, and the way your policy is paid out are all important questions you will ask.

Once you come to the conclusion that you need to purchase a life insurance policy, though, perhaps the most crucial question you will as is this: should I get a term or a whole life insurance policy?

In addition to receiving quotes from multiple companies, there’s something else you need to do: decide if term or whole life coverage is right for you.

There’s no denying the fact that both types of policy have both benefits and drawbacks. Your job is to compare the pros and cons, cut through the clutter, and make an informed decision that will benefit you and your family.

In this post, we’ll unpack some of the key questions you need to consider as you go about choosing between a term and a whole life policy.

What is the Difference Between Term and Whole Life Insurance?

There are a few differences between term and whole life insurance. The first is how long coverage is provided. Term life insurance lasts for a determined amount of time. This can range anywhere between 10-30 years. The fact that there is an expiration for term life means that it is less expensive and to the point. On the other hand, a whole life insurance policy does not have an expiration date. Since it provides coverage for a lifetime, this will be a little more expensive. You may end up paying at least 6 times more than you would with term life insurance.

The second difference between term and whole life insurance, which was briefly mentioned, is the expense. To elaborate, a whole life policy can cost more than term life due to the policy paying the insurance company and contributing to the cash value component. Whether monthly or yearly, a percentage of the premium is forwarded to the insurance company as well as the cash value, earning interest. The interest rate isn’t usually that high. If you invested the money elsewhere, you could earn more. The cash value increases over time and can be utilized for other financial reasons. For example, if you need a loan, you have it right at your fingertips. Keep in mind that the cash value is exclusive for use during your lifetime. A beneficiary will not receive the money.

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Term vs. Whole Life Insurance: Answer these Questions

When you are considering purchasing a life insurance policy and trying to decide on the best type of life insurance plan to buy, you can look for assistance from your life insurance broker.

You can also consult with your family, deciding together how to meet your family’s needs. But ultimately, you and you alone are in charge of making the final decision.

By addressing the following questions, you’ll find it much easier to purchase the right type of policy at the right time.

How much coverage do you need?

To determine how much insurance coverage you need, you need to consider what state the people who depend on you would be left in if you were to pass away.

To do that, you need to look at your income, debt, and what you hope to leave to your descendants.

Let’s take a closer look at those factors.

  • Age: If you are nearing retirement, or your dependent children are nearing adulthood, a term life policy could be completely sufficient to meet your needs. Conversely, if you are young and looking for affordable coverage that would last until, say, your college debt is repaid, you could purchase a cheap term policy for that amount of time.
  • Income: The most important consideration is getting enough life insurance to cover your income. As a general rule, you will need 10 times your income, but this measure is merely a generic guideline. How much insurance you purchase will depend on your particular situation. You can also look at the age of your kids and your spouse to determine how long they would need your income to survive.
  • Debt: The next significant factor to consider is your debt. College loans, auto loans, a mortgage, or any other unsettled loans could come back to bite your family in the wake of your death. Likewise, you’ll want to consider final expenses. In a devastating time, you want to ensure your family has enough money to cover a funeral.
  • College Fund: If you want to ensure your kids receive a college education, pay for private school tuition, or you wish to fund any other ventures for them, you need to factor that amount in as well.

The amount you reach when you add up your children’s education, your debt, and your income should help you to decipher whether a whole or term policy is better suited to your needs.

In reality, getting enough coverage with term life insurance is not very hard.

However, having enough coverage with whole life insurance will take a significant monthly budget. If cost is your main consideration, a term life policy could be the most suitable plan for you.

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What does your budget look like?

If you’re shopping based on price alone, not taking anything else into consideration, you’ll typically find that term life insurance is more affordable.

Of course, there are several tradeoffs to take into consideration. For example, you may be able to save money now, but your policy will expire at some point in the future. When this happens, you’ll be older, which means purchasing another policy will cost more.

Though a whole life policy can provide you with l0ng term security, the cost can be enough to break some people’s budgets, so you ultimately need to compare quotes to determine what type of policy you can afford to fund now.

Are you interested in lifelong coverage?

Some people are okay with the idea that their policy only provides coverage for a specific period of time, such as 15 or 20 years. A term life policy is fantastic to cover immediate needs like protecting a child until he or she reaches adulthood, but it may not provide the peace of mind that every insurance shopper desires.

Others might not see the point in this type of policy. Instead, they realize the benefits associated with a whole life policy. With a whole life policy, as long as you pay your premium in full every year, your coverage will remain in effect.

Are you excited about the idea of your life insurance policy doubling as an investment?

With term life insurance, the idea of investing never comes into play. With whole life insurance, however, it does, leaving you to think long and hard about how mingling life insurance and investments could improve your financial situation.

A lot of whole life insurance policies gain cash value as the years go by. Furthermore, depending on the company, you may be eligible for annual dividends.

With these considerations in mind, you may soon find that paying more for whole life insurance is well worth it.

On the other hand, you may do better by getting term insurance and investing the rest, as many financial advisors suggest.

Is it possible that you could be interested in a life insurance loan in the future?

A life insurance loan is something that many people overlook when purchasing life insurance. This option is another key difference between what term and whole life policies have to offer.

With both universal life insurance policies and whole life policies, you may have the option to take out a loan against the policy’s cash value. Borrowing from your loan is convenient in the sense that it could be easier than obtaining a traditional loan from a bank, depending on your financial standing. But you may encounter some sneaky hidden costs and the consequences of failing to repay it could be detrimental to more than your credit.

With careful and disciplined repayment, however, you may find a life insurance loan to be beneficial in some circumstances.

Note: term life policies don’t afford this opportunity. While there are plenty of other outlets for obtaining a loan, you should be aware of this distinct feature of whole life policies as you make your decision.

How many quotes are you interested in receiving?

Unfortunately, there are many myths associated with the life insurance industry. One of the most common is that it’s easier to purchase a term life insurance policy because more companies offer this coverage.

The truth is, it doesn’t matter what type of policy you’re seeking. You may be surprised to learn that you’ll find many companies, both big and small, offering what you’re looking for.

Generally speaking, you won’t have any trouble securing five or more quotes, all from companies with a good reputation and excelling ratings. Here you can get online whole life insurance quotes to help you make the call.


As noted above, the type of life insurance you purchase is based largely on your personal preference, family situation, and finances.

If you’re comparing term and whole life policies, answer the five questions above. By doing so, you’ll find yourself moving in the right direction and in a position to make a smart and confident purchase.