Term Vs Whole Life Insurance

Let’s start off by answering some common questions we get from clients.

What is Life Insurance?

Life insurance is not the cash value of your life, but an end-of-life plan to cover the financial costs of loss of life- mortgage, medical bills, funeral expenses, etc. As Tim Maurer, of Forbes, expertly summarizes- “Life insurance is a contract (called a policy).

A life insurance policy is a contract between a life insurance company and someone (or occasionally something, like a trust) who has a financial interest in the life and livelihood of someone else.

The insurance company pools the premiums of policyholders and pays out claims—called a death benefit—in the event of a death. The difference between the premiums taken in and the claims paid out is the insurance company’s profit.”

How Does Life Insurance Work?

Here is a simple breakdown of the four basic roles involved in a life insurance policy:

  • The insurer: the insurer is the party responsible for paying out claims in the case of a death, the life insurance company
  • The owner: Responsible for premium payments to the insurance company, the owner of the policy must keep up with monthly payments to keep the policy valid
  • The insured: the life insurance policy is based on the insured person’s life
  • The beneficiary: the person, or other entity that will benefit from and receive the life insurance claim when the insured dies

When you purchase life insurance you make monthly payments, or premiums, to keep your policy valid. Premiums vary depending on your age, gender, medical history, and the dollar amount of your life insurance policy. The insurer that you choose will provide your family (beneficiaries) with an insurance claim when you die. The money can be used for:

  • Supplementing for lost income
  • Paying for medical bills not covered by health insurance
  • Funding a dependent’s college education
  • Paying off a mortgage
  • Paying for a funeral

Who Needs Life Insurance?

Does anyone rely on the financially?

If the answer is yes, you need life insurance!

It’s basically a no-brainer if you are married or have dependent children.

However, there are many other circumstances that prompt people to purchase life insurance.

For example, people who are divorced, have a life partner or have dependent parents, siblings, or grandchildren obtain life insurance to take of those who would survive them.

Even if you are financially stable and independent, you should still consider the expenses that come with covering a funeral- upwards of $10,000. Taking out a basic life insurance policy will save your family members from the burden of that cost.

Term vs. Whole Life Insurance 

What are the different types of life insurance?

Most insurance policies fall under two main umbrellas: term life insurance and permanent life insurance.

What is the difference between term and permanent life insurance?

The key differences in the two types of life insurance are the period of coverage, the payout, and protection provided.

Different types of life insurance are designed to suit the needs of different individuals at their unique stages of life.

Which type of life insurance is right for me?

There are several factors to consider as you begin to pursue your options:

Term Permanent
Financial benefits for beneficiaries
Insurance coverage for your whole life
Locked in premiums for life
Cash value accumulation
Possibility of earning dividends
Lower coverage costs

Term Life Insurance

What is it? Term life insurance is a policy with coverage for a specific time limit. Normally 15 years, 20 years, 25 years, 30 years, but policies can be longer.

If the person dies during the set term (or time period), the insurer pays a death benefit to the beneficiary. However, if the person does not pass away during that set term, then no payout of any kind is received by the beneficiary.

In addition, no part of the premiums is paid back. Term life insurance is the most basic option that can be purchased. It is affordable because it offers pure death benefit protection only.

Available Term Periods (Lengths)

You can buy term life insurance in increments of 10, 15, 20, 25 or 30 year terms. Most term life policies will expire at the of age 95, no matter the term period.

Your policy rate or premium will be locked in for the duration of your term. But when the term period expires, that guaranteed rate is over, and renewing or beginning a new term with cause the cost to go up significantly.

Generally speaking, costs increase with the length of the term. So 20-year is more expensive than 15-year, which is more expensive than 10-year. This is because you’re paying for a longer rate guarantee.

Some life insurance companies offer a term period as short as one year, sometimes called Annually Renewable Term (ART). These policies can be renewed for one-year intervals.

Let’s take a look at some term life insurance rates:

Term Life Insurance Rates

Term Life Insurance Rates for Smokers

Males

Age Term Length Face Value Monthly Rate
30 10 Years $500,000 $52/mo.
20 Years $500,000 $72/mo.
30 Years $500,000 $115/mo.
40 10 Years $500,000 $81/mo.
20 Years $500,000 $133/mo.
30 Years $500,000 $216/mo.
50 10 Years $500,000 $198/mo.
20 Years $500,000 $327/mo.
30 Years $500,000 $530/mo.
60 10 Years $500,000 $477/mo.
20 Years $500,000 $767/mo.
30 Years $500,000 N/A

Females

Age Term Length Face Value Monthly Rate
30 10 Years $500,000 $40/mo.
20 Years $500,000 $58/mo.
30 Years $500,000 $85/mo.
40 10 Years $500,000 $65/mo.
20 Years $500,000 $105/mo.
30 Years $500,000 $156/mo.
50 10 Years $500,000 $149/mo.
20 Years $500,000 $239/mo.
30 Years $500,000 $398/mo.
60 10 Years $500,000 $326/mo.
20 Years $500,000 $547/mo.
30 Years $500,000 N/A


Term Life Insurance Rates for Diabetics

Males

Age Term Length Face Value Monthly Rate
30 10 Years $500,000 $50/mo.
20 Years $500,000 $68/mo.
30 Years $500,000 $111/mo.
40 10 Years $500,000 $68/mo.
20 Years $500,000 $107/mo.
30 Years $500,000 $187/mo.
50 10 Years $500,000 $112/mo.
20 Years $500,000 $161/mo.
30 Years $500,000 $289/mo.
60 10 Years $500,000 $231/mo.
20 Years $500,000 $445/mo.
30 Years $500,000 N/A

Females

Age Term Length Face Value Monthly Rate
30 10 Years $500,000 $43/mo.
20 Years $500,000 $59/mo.
30 Years $500,000 $96/mo.
40 10 Years $500,000 $55/mo.
20 Years $500,000 $83/mo.
30 Years $500,000 $140/mo.
50 10 Years $500,000 $82/mo.
20 Years $500,000 $119/mo.
30 Years $500,000 $209/mo.
60 10 Years $500,000 $150/mo.
20 Years $500,000 $304/mo.
30 Years $500,000 N/A

Term Life Insurance Rates for Preferred Health

Males

Age Term Length Face Value Monthly Rate
30 10 Years $500,000 $13/mo.
20 Years $500,000 $20/mo.
30 Years $500,000 $34/mo.
40 10 Years $500,000 $19/mo.
20 Years $500,000 $31/mo.
30 Years $500,000 $58/mo.
50 10 Years $500,000 $46/mo.
20 Years $500,000 $82/mo.
30 Years $500,000 $140/mo.
60 10 Years $500,000 $122/mo.
20 Years $500,000 $235/mo.
30 Years $500,000 N/A

Females

Age Term Length Face Value Monthly Rate
30 10 Years $500,000 $12/mo.
20 Years $500,000 $17/mo.
30 Years $500,000 $28/mo.
40 10 Years $500,000 $17/mo.
20 Years $500,000 $27/mo.
30 Years $500,000 $45/mo.
50 10 Years $500,000 $37/mo.
20 Years $500,000 $61/mo.
30 Years $500,000 $107/mo.
60 10 Years $500,000 $83/mo.
20 Years $500,000 $158/mo.
30 Years $500,000 N/A

Popular riders and options

Riders are the additional benefits that can be bought and added to a basic insurance policy. You’ll pay a little more, but gain flexibility and control in how you choose to increase or decrease your coverage.

If you might want more coverage, look ino: the guaranteed insurability, accidental death, long term care, and family income benefits riders. These riders account for significant life changes that you might want to take into consideration as you plan your life insurance policy.

Who is Term Life Insurance Best For?

For single millennials and even young families, term insurance can be a good option. For those who seek protection against the loss of income of a primary earner for a stated period of time, at an affordable cost, term life insurance is ideal.

Those with pre-existing conditions or health complications beware, a medical examination will be required. If you are less than 35 years of age and in good health, you could lock in an excellent fixed rate.

Best Term Life Insurance Companies

Based on data from JD Power customer satisfaction reviews, you can confidently purchase quality term life insurance from these top companies Protective Life, Banner Life, AIG, Ameritas, and Lincoln Financial.

Company A.M. Best Rating Customer Reviews
Protective Life A+ 4.3/ 5
Banner Life A+ 4.2/ 5
AIG A 4.1/ 5
Ameritas A+ 4.0/ 5
Lincoln Financial A+ 4.1/ 5

Pros and Cons of Term Life Insurance:

Term life is the simplest, and the least expensive. You’ll can match your terms to meet your needs. On the flip, your coverage is temporary and you may very well pay premiums for decades and “get nothing out of it.”

It’s risk management, not an investment. To put things into perspective with a metaphor, Term life insurance is very similar to renting a house.

It provides you with protection for a specific term or period of time. You essentially “rent” your policy until it expires, like a lease. If you survive the policy then you’ll be left with no “equity”.

Whole Life Insurance

What is whole life insurance?

Also referred to as permanent life insurance, whole life insurance is the major alternative to term life insurance. It offers coverage for your entire life. Whereas term life insurance will end at age 95, whole life is guaranteed to last until you pass- even past age 100. 

In contrast to term life insurance, permanent life insurance builds cash value over the course of the policy. It offers what term life insurance does and more- both death benefit protection and a cash value!

Is a permanent life policy a good investment?

Yes, because the money you contribute to the cash value portion is allowed to grow on a tax-deferred basis. Many policies pay out dividends to their policyholders (also untaxed!), which help the cash value grow.

Can you convert a term life insurance policy to whole life? Perhaps you purchased term life insurance at a younger age, and you’re nearing the end of term with no future plan in place. Luckily, most term life insurance policies can be converted to whole life insurance before the age of 75.

What are my whole life insurance options? All types of permanent life insurance include a death benefit and a cash value, but they differ in how the money is handled and invested. Here are your options explained, and compared with term life:

Term Life Whole Life Variable Life Universal Life
Death benefit
Whole life coverage
Yearly dividends as an option
Guaranteed premiums
Flexibility to adjust premiums and death benefit
Cash value accumulation

Variable Life

Want to be involved in investing your money? The policyholder can actively participate in investment options, such as equities. Funds have the potential to grow significantly more than the funds in a standard whole life policy.

However, there is risk involved. Cash in a variable life policy are subject to the ups and downs of the market. The death benefit can also go up or down – but policy normally guarantees that it will not go below the original amount of death benefit that is purchased.

Variable life premiums are more expensive than term life insurance. The table below quotes premiums for a $250,000 policy, based on good health and no smoking. The younger you enroll, the better premium you can secure. Health issues and tobacco use will cause premiums to go up significantly.

Universal Life

Known for being flexible, as the policyholder you are allowed – within certain parameters – to choose how much of your premium dollars will go towards the policy’s death benefit, and how much will go towards the policy’s cash value.

If you like to be control and know where your money is going, this could be a good fit for you. The money in the cash value component of a universal plan can be borrowed or withdrawn for any reason.

The graph below displays sample rates for a $250,000 policy. Rates are based on good-health and no smoking. It is difficult to enroll in a universal life policy after the age 65. As with all life insurance policies, health issues and tobacco use will cause premiums to increase.

Popular riders and options: Premiums on whole life policies are almost always higher than term life insurance policies, and your policy will only be valid if you keep up with your premium payments.

That’s why a waiver of premium rider is popular add on to whole life insurance; with this rider, future premiums are waived if the insured becomes permanently disabled or loses his or her income as a result of injury or illness prior to a specified age.

Who is whole life insurance best for?

If you have a sizable estate or amount of assets to protect, Whole life insurance offers a larger amount of coverage that you can customize. It is also ideal for people who want to you use life insurance as an investment, gaining the living benefits it has to offer.

Whole Life Insurance Rates

Whole Life Insurance Rates for Preferred Health

Males

Age Face Value Monthly Rate
20 $500,000 $152/mo.
30 $500,000 $160/mo.
40 $500,000 $248/mo.
50 $500,000 $682/mo.
60 $500,000 $1,464/mo.

Females

Age Face Value Monthly Rate
20 $500,000 $128/mo.
30 $500,000 $136/mo.
40 $500,000 $216/mo.
50 $500,000 $484/mo.
60 $500,000 $996/mo.


Whole Life Insurance Rates for Diabetics

Males

Age Face Value Monthly Rate
20 $500,000 $500/mo.
30 $500,000 $544/mo.
40 $500,000 $856/mo.
50 $500,000 $1,386/mo.
60 $500,000 $2,772/mo.

Females

Age Face Value Monthly Rate
20 $500,000 $528/mo.
30 $500,000 $472/mo.
40 $500,000 $644/mo.
50 $500,000 $1,012/mo.
60 $500,000 $1800/mo.

Whole Life Insurance Rates for Smokers

Males

Age Face Value Monthly Rate
20 $500,000 $520/mo.
30 $500,000 $576/mo.
40 $500,000 $1,064/mo.
50 $500,000 $2,783/mo.
60 $500,000 $5,724/mo.

Females

Age Face Value Monthly Rate
20 $500,000 $392/mo.
30 $500,000 $464/mo.
40 $500,000 $840/mo.
50 $500,000 $2,156/mo.
60 $500,000 $3,912/mo.

Best Whole Life Insurance Providers

Based on data from JD Power customer satisfaction reviews, you can confidently purchase quality term life insurance from these top companies Prudential, Mutual of Omaha, Northern American, Cincinnati Life, and Ameritas.

Company A.M. Best Rating Customer Reviews
Prudential A+ 4.2 / 5
Mutual of Omaha A+ 4.1 / 5
North American A+ 4.1 / 5
Cincinatti Life A 4.2 / 5
Ameritas A+ 4.1 / 5

Pros and Cons of Whole Life Insurance:

The major benefit with whole life insurance is that you get a lifetime of coverage, that accrues a cash benefit. Unlike term life insurance, you have access to your money and control how you use it. The main drawback is paying higher premiums.

In summary, as you compare term vs. whole life insurance, consider the advantages and disadvantages of each. Your final decision will be based upon your unique needs and circumstances.

Don’t forget to look into special riders and options, and shop with a top life insurance company that will provide quality service!

Finding the Best Life Insurance Policy for You 

When it comes to finding the best life insurance for you and your family, you want to be sure that you compare and fully understand your policy options.

Our independent life insurance agents work with some of the best whole and term life insurance companies on the market to help provide our clients with affordable life insurance rates that fit their needs.

Give us a call today or use our online quoting tool for quick and easy life insurance rates!

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