Insurance
Term vs. whole life, in plain English
One is for a set number of years. The other is for life.
Most life insurance falls into two types. The main difference is how long the coverage lasts, and what you pay for it.
| Term life | Whole life | |
|---|---|---|
| How long it lasts | A set period, often 10, 20 or 30 years | Your whole life, as long as premiums are paid |
| Cost | Lower | Much higher for the same coverage |
| Builds cash value? | No | Yes, a savings part that grows slowly |
| If you outlive it | Coverage ends; nothing is paid | Not applicable; it pays whenever you die |
Why people choose each
People often choose term life to cover years when others depend on their income, such as while children are young or a mortgage is being paid. Whole life is often chosen by people who want coverage that never ends or who want the savings feature.
Other names you might see
- Universal life: a type of permanent insurance with more flexible premiums
- Group life: coverage through an employer, usually term
- Final expense insurance: small whole life policies meant to cover funeral costs
Good to know
For your family, the type matters less than knowing the policy exists. The insurer's name and policy number are what they'll need.