top of page

Term vs. Whole: What You Need to Know

Term is short-term life insurance or partial, Whole is permanent life insurance. Think of the concept like car insurance for a moment. There is some coverage somewhere missing in a term policy to allow it to cost less, similar to liability and "full" coverage car insurance. Consumers need to understand the structure and use before buying life insurance. 

The most basic type of life insurance is term life insurance. Term life insurance policies cover the policyholder for a set number of years, anywhere from 1 to 30. For younger, healthy people, term life insurance is the least expensive option. You pay relatively low rates for a fixed number of years. Term life policies have no cash value of their own and cannot build equity. They do not accrue interest and you cannot borrow money against them. 


$50 x 12 months x 10 years= $6,000. Once the term period expires, the policy is no more. It can be renewed, but not "extended" and it will be at a higher cost due to your age.


Annual Renewable- Increases each Year. 5Yr- Increases every five years. 10Yr, 20Yr and 30yr (It is not advisable to carry a 30Yr term in place of a permanent policy. Although attractive, people become elder and can forget, easily outliving their coverage.)


Decreasing Term- 15Yr and 30Yr Decreasing Term works great for those with mortgages. As the years pass, the face value decreases along with the premium until the mortgage is paid. Others use it for other higher value expenses now, that they will not need the payment protection later. It can be a standalone policy or included as a rider to a permanet policy.


Good course of action when buying term life insurance: Make sure that your term policy provision is both Renewable and Convertible and to what age limit because it is important.

When your term policy expires and you need to renew, you'll pay a higher premium because you'll be older and may suffer from health issues.  


Due to later health issues or disability, you may not be able to obtain new life insurance or a policy at an affordable cost. 


To save on life insurance costs, a good company will allow you to have a smaller value whole life (permanent) policy and include the additional term rider to cover larger expenses while you are younger, such as a mortgage. By the time your home is paid, autos, and the children are adults, you will still have your whole life policy.  Your overall premium will decrease once the term is not needed anymore and you will have the advantage of inexpensive permanent policy during your older years. 


Other advantages: A good company will permit converting some or all of the term coverage to permanent whole life without proof of insurability or a medical exam. This means a great deal someone who was once healthy when his term policy issued but became permanently ill or disabled years later.   


Whole Life insurance fall under the heading of permanent life insurance. As the name implies, the policy is good from the day you buy it until the day you die, no matter when you die. Permanent life policies can either have a fixed or flexible premium. Term life insurance, whole life, health insurance, insurance agent, final expense, insurance broker, affordable, cheap, quality, policy

bottom of page