Whole vs. Term Life Insurance: What Are the Differences?

Apr 10, 2020 2 min read

Deciding to purchase life insurance is a smart move. A move that ensures your loved ones’ futures are protected. But before you purchase a life insurance policy, it’s important to understand the differences between two main types of coverage — whole and term life insurance. Here, we break down the differences between whole life and term life insurance so you can choose the right coverage for you.

Term Life Insurance

A simple way to think about term life insurance is to view it as temporary coverage. With this coverage type, your premiums remain fixed for the term (set number of years). You can opt to continue coverage when the term runs out, but the premiums may increase (significantly). This policy type is designed to provide a death benefit to your beneficiaries should you pass away during the term of your coverage. 

Term policies are appealing because they generally have a low premium, creating an affordable way to get the coverage you need. Because of the low cost, term life policies are an attractive option for younger people and families.

Whole Life Insurance

Whole life insurance is a type of permanent life insurance, which offers protection for your entire lifetime as long as premiums are kept current. 

One major benefit of a whole life insurance policy is that you’ll have coverage for life. Since coverage is guaranteed for life you won’t have to worry about the premiums increasing as you grow older. 

You also accumulate cash value for your whole life insurance policy as you pay your premiums. This cash value grows on a tax-deferred basis, which can help your funds grow faster. And, with a whole life policy, you have the option to borrow against your policy. 

Because the premium cost is typically higher on a whole life policy, this option may be more attractive to those who have more income to put toward premiums. A whole life policy may also appeal to those who want to use the policy’s accumulated cash value to create a supplemental income for things like long-term care, retirement or keeping a business in your family. Policyholders who already have term life insurance have the option to convert to whole life for cash benefits like these.

Whole life insurance is one of two options for permanent life insurance. Another form of permanent life insurance is universal life (UL) insurance, which differs from other life products because it offers flexible protection and flexible payments. Similar to whole life policies, UL policies build an accumulated value based on your premium payments. You can use the accumulated value to borrow against while you’re still living for things like purchasing a home, starting a business or even creating supplemental income for your retirement. 

Find the Right Fit for You 

We understand your life insurance needs change over time. We can help you choose the right type of life insurance that fits your needs through all of life’s changes. Each option differs in price and coverage characteristics, but all serve as protection for those who matter most to you. No matter which type of coverage you choose, life insurance premiums are almost always lower when you’re younger and healthier, so don’t wait! Contact your Farm Bureau agent to schedule a SuperCheck® to discuss your specific life insurance needs. 

Want to learn more?

Contact a local FBFS agent or advisor for answers personalized to you.