• Term Life Insurance provides coverage for a specific “term” or period of time, typically 10‑30 years. Should the covered person pass away during that time, their beneficiary receives the pre‑set death benefit.  
• Whole Life Insurance is permanent life insurance that provides coverage throughout a covered person’s life (as long as they pay their premiums). In addition to the death benefit, whole life insurance provides cash value—a savings component that grows over time.  

Term Life Insurance: Pros and Cons  

• Affordability ‑ Term life has lower rates and premiums than whole life insurance.  
• Simplicity ‑ Term life is straightforward and easy to understand.   
• Flexibility – You can choose the duration of term life insurance to meet a specific, temporary need. 

• Coverage is Limited – At the end of the policy term, coverage expires. To then obtain a new policy would require you to reapply and potentially pay higher premiums.  
• Premiums Increase ‑ Term life premiums increase upon renewal as you age. 
• No Cash Value ‑ Term life does not accumulate cash value, so once the policy expires, it has no value. 

Whole Life Insurance: Pros and Cons 

• Lifetime Coverage – Because whole life insurance provides lifetime coverage, beneficiaries receive the death benefit regardless of when the covered person dies.  
• Accumulation of Cash Value ‑ A pool of money, known as cash value, will begin to grow on a tax‑deferred basis. You'll know upfront how much money will accumulate each year you own your policy, provided that the premiums are paid. What's more, you can borrow against the cash value to meet any financial obligation that you may have, such as paying college tuition, supplementing retirement income or fixing that leaky roof. No credit checks or lengthy applications are required. Taking a policy loan against the cash value of your policy is guaranteed and you will receive your loan amount in only a few days. Keep in mind that outstanding loan against your policy will reduce the death benefit.
• Guaranteed Premiums ‑ Premiums for whole life insurance are guaranteed to stay the same throughout the life of the policy, so costs are predictable. 
• Pays Dividends ‑ Some whole life policies (called “participating” policies) pay dividends—a return of premiums—when the insurance company has a profitable year. 

• Higher Premiums ‑ Whole life has higher rates and premiums than term life.  
• Potential Surrender Charges ‑ If policyholders surrender the policy early, there are usually penalties that reduce the policy’s surrender value. 
• Complex to Understand – Because of its multiple features (and options), whole life takes more effort to fully understand.  

 Which Form of Life Insurance is Better for You? 

• You’re on a tight budget. 
• You seek to protect a short‑term financial obligation, such as covering mortgage payments or providing support for dependent children.    
• To supplement an existing whole life policy.    

• You seek permanent coverage that will cover you no matter how long you live. 
• You want an additional savings vehicle that you can borrow against or withdraw from—whether saving for college or retirement, or as an emergency fund. 
• You don’t want to deal with increasing premiums.   

Key Takeaway