Most people buying life insurance choose between two kinds. The right one depends on how long you need coverage and what you want it to do.
Key facts
- Term life covers a set period, such as 10, 20 or 30 years, and pays out only if you die during that time.
- Whole life is permanent coverage with a cash value component, and it costs considerably more.
- Term often suits temporary needs, such as raising children or paying off a mortgage.
- Compare quotes for the same coverage amount and length, and check the insurer’s financial strength.
Life insurance pays a sum, called the death benefit, to the people you choose if you die while the policy is active. The two main types handle “while the policy is active” very differently.
Term life insurance
Term insurance covers you for a fixed period, often 10, 20 or 30 years. If you die during the term, your beneficiaries receive the death benefit. If you outlive the term, the policy ends without a payout.
- Cost: usually much lower premiums for the same coverage amount.
- Best for: needs that end, such as children growing up or a mortgage being paid off.
Whole life insurance
Whole life is a type of permanent insurance. It covers you for life as long as premiums are paid, and part of each premium builds a cash value you can borrow against or withdraw.
- Cost: considerably higher premiums.
- Best for: lifelong needs, such as supporting a dependent with special needs or certain estate planning goals.
Side by side
| Term life | Whole life | |
|---|---|---|
| Length of coverage | A set number of years | Lifetime |
| Premiums | Lower | Higher |
| Cash value | None | Builds over time |
| Flexibility | Can often convert to permanent | Fixed structure; other permanent types offer more flexibility |
Smart tip
Get quotes for the same coverage amount and term length from several insurers. Small differences in health class or term length can change prices noticeably.
Questions to ask yourself
- Who depends on your income, and for how long?
- What debts would your family need to pay off?
- Could you afford whole life premiums for decades?
- What other savings and retirement plans do you have?
Check this
Check an insurer’s financial strength rating and your state’s department of insurance website to confirm the company and agent are licensed.
Making the choice
For many households, term insurance covers the years when protection matters most at a price they can sustain. Our guides to how much coverage you need and naming beneficiaries cover the next steps.
Questions we hear
What happens when a term policy ends?
Coverage stops. Some policies let you renew at a higher price or convert to permanent coverage without a new medical exam.
Is whole life insurance an investment?
It builds cash value, but the growth is usually modest and the premiums are high. Compare it with other ways to save before buying it for that reason.
Can I have more than one policy?
Yes. Some people combine policies, such as a long term policy and a smaller permanent one.
This guide is general information, not insurance or legal advice. Coverage, prices and rules vary by insurer and by state, so read your policy documents and check with your insurer, a licensed agent or your state’s department of insurance before you decide.