Whole Life vs. Term Life Cost

Are you in the process of shopping for life insurance? Are you on the fence about what type of coverage is best? Do you worry that you could end up with a policy that doesn’t suit your budget, either now or in the future?

Generally speaking, there are two primary types of life insurance:

  • Whole life insurance
  • Term life insurance

There are pros and cons of both types, so it’s critical to carefully compare the two to make an informed decision.

While the cost of whole life insurance vs. term is sure to come into play – and it’s something we’re going to discuss in great detail – let’s first start with a basic overview of each type. 

Top Features of Whole Life Insurance

You’re buying a policy with a guaranteed death benefit with whole life insurance. As long as you continue to pay your premium, your beneficiary will receive the predetermined benefit at the time of your passing.

Some of the top features associated with a whole life insurance policy include:

  • Coverage for your entire life
  • The ability for your policy to accumulate cash value 
  • It gives you and your loved one peace of mind for your entire life 
  • The ability to withdraw accumulated cash during the life of the policy

With features like these, it’s easy to see why whole life insurance has always been a popular choice among individuals from all walks of life. 

Top Features of Term Life Insurance

Term life insurance is unique in that you purchase coverage for a predetermined period, such as 10, 15, or 20 years. Once this period comes to an end, you no longer have coverage. At that point, you’re once again in the market for a policy.

Top features of term life insurance include:

  • Lower cost as a result of coverage for a specified period of time 
  • The opportunity to renew the term 
  • The ability to convert it to whole life insurance in the future

As you can see, term life insurance has an entirely different set of features compared to whole life insurance.

Comparing the Cost of Whole Life and Term Life Insurance

You can’t make an informed decision on which type of insurance is best until you know the price of each. And that starts with obtaining a minimum of three to five quotes from various providers.

While it varies from person to person, whole life insurance typically costs 5x to 15x more than term life insurance. However, don’t let this immediately scare you away. Keep in mind that you get something of great value in return: a policy that provides coverage for the rest of your life.

So, let’s put these estimates to good use.

Take, for example, a 40-year-old woman interested in a 15-year-term life insurance policy with a death benefit of $200,000.

If the term life estimate is $20/month, you can expect the whole life estimate to be somewhere in the $100 to $300 per month range. 

But again, consider the fact that you are not comparing apples to apples. Some of the questions you need to answer include:

  • How much money can you comfortably afford to spend on life insurance every month? Every year?
  • Are you married to the idea that it’s best to purchase whole life insurance – regardless of the cost – because of the guaranteed death benefit?
  • Are you intrigued by the idea of buying a higher level of term coverage at a lower rate than whole life insurance?

As you answer these questions, you’ll begin to formulate a strategy for moving forward.

Factors that Determine Your Cost

In a perfect world, you’d qualify for a high level of life insurance coverage at an affordable monthly premium. While it may work out for you, life insurance companies consider many factors when calculating your premium. This includes but is not necessarily limited to:

  • Your current health
  • Your current age
  • If you’re a smoker
  • Preexisting conditions, such as cancer, heart attack, or diabetes

For instance, a 25-year-old in perfect health will pay less for the same life insurance than a 50-year-old with a history of cancer.

Final Thoughts

As you compare the cost of whole life insurance vs. term, do so with the idea that you can only afford what fits your budget.

It’s essential to purchase high quality and comprehensive policy, but make sure you’re comfortable with your ability to make the premium payment every month, quarter, or year.

Taking this approach will help you make an informed and confident decision. 

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