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While term life insurance may not necessarily be “better” than whole life insurance, term is definitely the right choice of coverage in most situations. Why? Because term life insurance is much more affordable.

Term life insurance is coverage that lasts for a specific period of time. Permanent coverage, whole life being the most well-known, lasts your entire life.

Because the main goal of life insurance is to protect your loved ones during their most financially-vulnerable years, a life insurance product that you only pay for during a specific period of time makes the most sense—in most cases.

But what about you? Should you buy term or whole life insurance? Let’s go over some scenarios to help you decide.

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When Term Life Insurance Is Better

If you have a young family and a mortgage, your loved ones are in their most financially-vulnerable years. Your spouse and children are dependent upon your income. If you were to die suddenly, would they be affected financially? This is where term life insurance can be lifesaving.

Are you a good saver?

If you’re a good saver, and by this I mean you regularly contribute to a savings and retirement account, purchasing term life insurance to protect your family for a definitive number of years is ideal. Your family has the protection they need, when they need it, and then the protection drops off later in life when your children are grown, the mortgage is paid down, and you have a healthy savings.

Like many types of insurance, term life insurance is a product you hope you never have to use.

Are you on a budget?

If you want a budget-friendly policy, term life insurance is ideal because it’s quite inexpensive.

Imagine you died without life insurance, how much tighter would your family’s budget become without your income?

Even a small $100,000 life insurance policy can go a long way for a struggling family – and its premiums won’t affect your monthly budget too much. Even if you’re not in stellar health, a $100,000 policy is affordable.

Quotes for a 20-Year $100,000 Term Policy for a 35-Year-Old Non-Smoking Male
Risk ClassMonthly Quote
Preferred Plus (best health)$8.80
Preferred$10.35
Standard Plus$14.33
Standard (average health)$14.36

Do you have outstanding loans?

Term life insurance is ideal if you have loans because you can dictate how long you want coverage for.

As an example, if you want to apply for a small business loan, you’ll need to give the lender a guarantee that you can pay back the loan, even if you die. This is when life insurance comes into play. If the loan is set for 20-years, you can get a life insurance policy with a 20-year term.

Another example, let’s say you and your spouse just purchased a house for your growing family. Your mortgage loan is a 30-year term. Buying a 30-year term policy makes the most sense. It will be the financial back-up should you die unexpectedly and it will ensure your family won’t have to sell the house.

» Learn more: Cover your debt with life insurance

Less common than mortgages and business loans, but still applicable to some, are co-signed loans. Maybe your parents co-signed your mortgage for you or your grandma is the co-signer on your private student loans, purchasing a term policy to protect those co-signers is not only smart, but a way to say thank you to those who supported you in your time of need.

If you were to die before the loan balances were paid off, the lenders would come after the co-signers for the money. However, a term policy’s death benefits can be used to pay off those balances instead.

When Whole Life Insurance Is Better

Whole life insurance is life insurance coverage that is life-long and accumulates cash value, which explains why you’re going to be paying about 10x more for a whole life policy over a term policy.

Consider the monthly quotes below. This applicant is a healthy, non-smoking male.

20-Year Term PolicyAge 30Age 40Age 50
$100,000$9.33$10.58$21.39
$250,000$12.49$17.33$38.76
$500,000$19.05$28.42$70.33
Whole Life PolicyAge 30Age 40Age 50
$100,000$76.13$113.49$177.01
$250,000$146.34$223.78$359.41
$500,000$287.44$442.31$751.63

However, it’s worthwhile to note that you likely need much less whole life insurance than term life insurance. For example, you typically wouldn’t buy enough whole life insurance to cover the cost of your mortgage because your mortgage won’t last your entire life, usually only 10-30 years.

Whole life insurance, if necessary, is best purchased as a supplement to term life insurance. For example, you could get a 30-year term policy to cover your mortgage and family needs and then supplement it with a small whole life policy that will cover end-of-life expenses, such as your funeral costs or medical bills, and leave behind an inheritance.

Do you have a child with special needs or a disability?

If you have dependents who will rely on you long-term, then a whole life policy may be better in this case. A term policy can still be useful to cover big ticket items such as your mortgage, but a whole life policy can help ensure your loved ones will always be financially protected even after you’re gone.

Are you not a disciplined saver?

You may have heard the saying “Buy term and invest the difference.”

Because term insurance is so affordable, it makes sense to own term and put the money you would have spent on a whole life policy into investments. However, this really only works if you actually invest that difference.

No judgment, but if you’re the type to have extra funds at the end of each month and end up just letting it sit in a checking account or spend it on something you don’t need, then you might want to consider a whole life policy.

A whole life policy will not only ensure your beneficiaries will have the necessary funds for your final expenses, but this policy also builds a cash value that you can borrow or withdraw from should you need it (however, there are caveats to this such as paying interest.)

» Learn more: The Differences Between Term and Whole Life Insurance

Should I Buy Term or Whole Life?

Whether you buy term, whole, or a little of both is ultimately up to you and it depends on your lifestyle and financial situation.

Again, in the majority of situations, a term life insurance policy is going to be your best option. It’s affordable, you have multiple term length options to choose from, and you can customize a policy with a rider or two if you so choose.

One of the most important riders is a term conversion rider. Most term policies include this for free.

A term conversion rider allows you to convert all or a portion of your term policy into a permanent policy. So, if you decide later on that you do need some life insurance coverage for your entire life, you have access to permanent coverage via your term policy. No need to reapply or prove you’re still insurable.

Term Life Insurance versus Whole Life Insurance

Term Life

  • Lasts a certain length of time
  • Pays death benefit only if you die within the term
  • Affordable
  • Most can convert into a permanent policy later on

Whole Life

  • Lasts forever
  • Pays a death benefit no matter when you die
  • Accumulates cash value
  • More expensive

Not sure how much life insurance coverage you need for your particular situation? Give our life insurance needs calculator a whirl. Answer a few questions and it gives you a good estimate on how much term life insurance coverage you should buy.

Remember, if you ever have any questions or would like to discuss your life insurance options with a real person – we’re here to help. Contact us at any time.

» Compare: Term life insurance quotes

Note: Life insurance quotes used in this article are accurate as of August 22, 2022. These are only estimates and your life insurance costs may be higher or lower.

About the writer

Headshot of Natasha Cornelius, a life insurance writer, for Quotacy, Inc.

Natasha Cornelius, CLU

Senior Editor and Licensed Life Insurance Expert

Natasha Cornelius, CLU, is a writer, editor, and life insurance researcher for Quotacy.com where her goal is to make life insurance more transparent and easier to understand. She has been in the life insurance industry since 2010 and has been writing about life insurance since 2014. Natasha earned her Chartered Life Underwriter designation in 2022. She is also co-host of Quotacy’s YouTube series. Connect with her on LinkedIn.