Difference Between Term And Whole Life Insurance Coverage

By: | Updated: Apr-20, 2023
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There are dozens of types of insurance policies, but most people know about only two main kinds: whole and term. Every financial product sold by the major carriers includes one of those features, namely unlimited or limited duration. Just as the difference between house and home is distinct, so are the differences here. One of the choices, whole life, lasts for as long as the owner is alive and continues to pay premiums.

The other, term insurance, comes with a fixed lifetime and expires on a set date. The beauty of the products is that each one is well-suited to a particular group of consumers, and each has its own long list of advantages and a few drawbacks. It’s imperative for prospective buyers to understand how each type of policy works and what its pros and cons are. Consider the following points before making a final selection.

Difference Between Term And Whole Life Insurance Coverage

Whole Life Policies

Insurance companies use several different terms for their products, but most share the wording whole life to describe a policy that continues until the holder dies or stops paying the premiums. Generations ago, these were the only kind of offerings available, especially in the early days of the industry. Later, carriers expanded their product lines and adapted policies to client needs. That’s how term and many other kinds of arrangements came into existence. Like most financial products, these policies come with their own set of pros and cons, discussed below.


Many working people who need a strong dose of financial security wonder whether term policies are even worth the trouble. Before learning all the facts, they assume that the no cash value feature renders the product useless. However, that kind of thinking does not account for the fact that many millions of people choose non-whole life protection year after year.

To find out the answer of why and learn more about how this kind of insurance works, review an informative guide that can show you whether this type of coverage is a good fit for your financial situation. In general, term-limited coverage contracts specify the number of years for which the policy will be in effect, what the annual premiums are, and what the benefit amount is. Review the pros and cons below.

Whole Life Advantages

Individuals who prefer extensive insurance coverage opt for whole life because of the included features like cash value build up, low-interest loans against the balance, adjustable premium amounts, and the fact that the agreement remains in effect as long as premiums are paid, and the policyholder is alive.

Whole Life Disadvantages

The price of coverage under this kind of agreement is substantially higher than for other kinds of insurance. While there is a cash value that accrues after several years, it’s usually more advantageous for people to place the premium amount into a savings account and purchase another kind of coverage. Working adults who want to pass on a large cash benefit to their heirs can do so with various non-whole options until they are at an advanced age. However, it’s difficult to find carriers that will issue finite-term coverage past the age of 85.

Term Advantages

There’s no ambiguity about the reason people usually prefer this kind of coverage in that it’s inexpensive. Plus, for younger adults who are in good health, the bargains are considerable. It helps to have the foresight to purchase low-cost insurance at a young age when premiums are low, and it’s still possible to lock in savings. Another selling point is simplicity.

There are not many complex scenarios and financial questions with a typical term policy. There are three elements to the equation: the premium, the benefit amount upon the death of the policyholder, and the length of the contract. It’s worth noting that agents sell many more of these kinds of policies than any other.

Term Disadvantages

While short-term coverage remains extremely popular among some demographics, there are a few downsides to these kinds of contracts. In addition to having finite lives and thus not lasting for the policyholder’s natural lifetime, non-whole-life policies that last for a specific number of years have little to no cash value. Note that some carriers now offer special versions that include a cash value element, but for the most part, they do not. Nor do limited life agreements offer a loan privilege, primarily because there is no monetary value against which the holder can borrow.

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