Term Life Insurance Buyer's Guide

What is the difference between term and whole life insurance?

Term life covers you for a specific period (10, 20, or 30 years) and is 5-15x cheaper than whole life. Whole life covers you permanently and builds cash value over time. Most financial advisors recommend term life for the majority of families — the savings can be invested elsewhere for better returns.

How do life insurance companies determine premiums?

Insurers use underwriting to set premiums based on age, gender, health history, family medical history, tobacco use, BMI, occupation, hobbies, and driving record.

What happens to my life insurance when the term ends?

When a term life policy expires, coverage simply ends and no death benefit is paid if you are still alive. Most insurers offer the option to renew coverage at a higher, age-adjusted premium or to convert the policy to a permanent policy without a new medical exam, though you must do so before the term expires. If you still need coverage, it is best to shop for a new policy or exercise your conversion option well before the expiration date.

What is the difference between term and whole life insurance?

Term life insurance provides coverage for a set period — typically 10, 20, or 30 years — and pays a death benefit only if you die during that term. Whole life insurance is permanent coverage that lasts your entire lifetime and builds a cash value component you can borrow against. Term insurance is significantly cheaper for the same death benefit, while whole life offers lifelong coverage and a savings element at a higher cost.