Term vs Whole Life Insurance Cost: A Comprehensive Guide

Term life insurance policies can cost as little as $10 per month, while whole life insurance policies can cost upwards of $100 per month.

The average cost of term life insurance is 60% less than the average cost of whole life insurance. This significant difference in cost is due to the fact that term life insurance policies do not build cash value over time.

Whole life insurance policies, on the other hand, can provide a guaranteed death benefit and a cash value component that can be borrowed against or used to pay premiums. This added benefit comes at a higher cost, however.

For example, a 30-year-old male non-smoker can expect to pay around $25 per month for a 20-year term life insurance policy, while a whole life insurance policy with the same coverage would cost around $150 per month.

A fresh viewpoint: Whats the Average Rate for Borrowing against Life Insurance Policy

If the owner and insured are different, the death benefit will be paid upon death of the insured.

If this caught your attention, see: Health Insurance Self Insured

You should consider the primary reason for purchasing a life insurance product, which is the death benefit.

Policy loans and withdrawals may create an adverse tax result, reducing both the surrender value and death benefit.

Withdrawals may be subject to taxation within the first fifteen years of the contract.

Life insurance products contain various charges, such as the Cost of Insurance Charge, Cash Extra Charge, and Additional Agreements Charge, which may increase over time.

Policyholders could lose money in these products due to restrictions, such as surrender periods.

Depending on actual policy experience, the owner may need to increase premium payments to keep the policy in force.

Broaden your view: Should I Surrender My Whole Life Policy

Cost is a major factor in choosing between term and whole life insurance, with term life often being the most affordable option. Term life is temporary and has no cash value, which keeps premiums low.

Your age and health are two of the biggest factors that affect the cost of life insurance. The younger and healthier you are, the less expensive the policy will be.

A $500,000, 20-year term life policy for a male applicant in excellent health can cost significantly less than the same policy for a female applicant. According to one example, the annual rate for a male applicant is $220, while for a female applicant it's $183.

The age of the applicant also plays a significant role in determining the cost of life insurance. As you can see in the table below, the cost increases dramatically as you get older.

Keep in mind that riders, or additional features, may incur an additional cost or premium.

You should consider your goals for life insurance when deciding between term and whole life insurance. If you want life insurance protection for a temporary need, such as your mortgage, replacing some of your income or helping protect your young children, term is likely the better option.

Your total coverage needs should also be a factor. Think of how much life insurance you need to provide financial security for your loved ones. If you are underinsured, you could leave them at risk.

If you haven't maxed out your other retirement accounts, using term life and investing your premium savings may be a better option. This can help you save money and potentially earn more in the long run.

Cost is a significant difference between term and whole life insurance. If you can afford the higher premiums, whole life insurance does deliver more than term life insurance. You get lifelong death benefit protection plus the cash value.

You should also consider your age when deciding between term and whole life insurance. Term life insurance makes more sense for younger people starting their families and careers. It's a way to get considerable death benefits at affordable prices.

Here are some ideal candidates for term insurance:

Whole life insurance can make more sense as you get older. You can then lock in coverage that will provide for your future final expenses and a possible inheritance. Most insurers don't allow people to buy term life insurance past age 75.

If you're looking for more flexibility than whole life insurance provides, consider other types of permanent life insurance like universal life insurance, variable life insurance, or indexed universal life insurance. These options often have varying costs and features depending on the type of coverage you buy and the performance of your cash value.

Term life insurance, on the other hand, is temporary and typically cheaper than whole life insurance because it offers coverage for a set number of years. You can expect to pay higher rates if you purchase a new policy when your term is up, unless you convert to a permanent life insurance policy before the deadline set by your insurer.

You may be able to convert your term policy into a whole life policy, which can be an excellent way to continue your life insurance policy and build cash value for you to borrow against. Alternatively, you can buy a term policy to supplement your whole life policy, which can help you build cash value and provide additional protection for your loved ones.

Here are some alternatives to term and whole life insurance:

Permanent life insurance is a type of coverage that remains in place until you die. It's also a financial tool that can help you build wealth and accumulate cash value to use during your lifetime.

You can convert term life insurance to permanent, but it's often more expensive than buying permanent life insurance from the start. Some term policies include a term conversion rider that lets you switch some or all of your death benefit into permanent protection without a medical exam.

Permanent life insurance premiums tend to be significantly higher than term life insurance premiums, especially for whole life policies. However, whole life premiums stay the same over time, whereas term coverage becomes increasingly more expensive with every renewal.

You may be able to get the benefits of permanent life insurance by converting your term policy into a whole life policy. Life insurance companies like Guardian allow for this, and it can be an excellent way to continue your life insurance policy and build cash value.

Related reading: S Is Covered by a Whole Life Policy

Here are some key differences between term and permanent life insurance:

Ultimately, whether permanent life insurance is right for you depends on your individual situation and needs. It's essential to consider factors like your age, health, and financial goals before making a decision.

If you're looking for alternatives to term and whole life insurance, consider other types of permanent life insurance. These options often have varying costs and features depending on the type of coverage you buy and the performance of your cash value.

Universal life insurance is a type of permanent life insurance that allows you to raise or lower premiums within certain limits. This flexibility may be helpful during times of financial stress, but it can also affect cash value growth.

Indexed universal life insurance can align a portion of your cash value with a stock market index, giving you the potential for higher returns. However, the total death payout may decline if you make too many minimum premium payments.

Curious to learn more? Check out: Which Type of Life Insurance Policy Generates Immediate Cash Value

Variable universal life insurance is another type of universal life insurance that offers permanent protections when premiums are paid. It offers flexibility in terms of premiums and the ability to invest through sub accounts, but this flexibility has a cost that could impact your overall cash value or death payout.

Annuities are insurance contracts that you can purchase with a lump sum payment or a stream of premium payments. They can pay you for a set period or for your entire lifetime, providing a consistent income stream.

Here are some key characteristics of annuities and VUL policies:

A Variable Universal Life (VUL) policy is considered both life insurance and a security and is sold with a prospectus.

Term life insurance policies generally last for a specific period, such as 10, 20, or 30 years, and the premium payments are usually lower than whole life insurance.

One of the key features of term life insurance is that it provides a death benefit to your loved ones if you pass away during the policy term.

The policy term can be renewed at the end of each term period, but the premium payments may increase with each renewal.

Worth a look: B Owns a Whole Life Policy

Whole life insurance is the most common type of permanent life insurance, and it typically costs more than term life. This is because most policies offer coverage that lasts until much later in life, such as until 90, 100 or 120 years old.

A portion of your premium goes toward the cash value, which can grow over time. You can borrow against it or surrender the policy for cash. Some whole life policies are "participating" life insurance policies, which means you may earn dividends based on the company's financial performance.

The death benefit is guaranteed, but be mindful of taking out cash value loans or withdrawals without paying them back. If you do take out a loan, you'll need to repay it, or your insurer will subtract any outstanding loans or withdrawals from the final death benefit paid out to your beneficiaries.

Here are some key features of whole life insurance policies:

• Death benefit is guaranteed

• Cash value grows at a guaranteed fixed rate

• Premiums remain level

• May earn dividends based on the company's financial performance

If you have existing life insurance, perhaps through your employer, it's essential to consider the cost difference between a term policy and a whole life policy.

A whole life policy can provide a considerable amount of benefits over the course of your life, including a payout, and its premiums stay the same over time.

Term coverage, on the other hand, becomes increasingly more expensive with every renewal, which may make a whole policy a better overall value depending on your situation.

Consider the following examples to help you decide:

As you weigh the options between term and whole life insurance, it's essential to consider your unique situation and priorities. Every person is unique, and the decision to buy a whole vs. a term policy should be guided by your specific situation and the things that matter to you.

If you already have existing life insurance, perhaps through your employer, you may want to consider how it fits into your overall insurance plan. You may be able to get a better deal by converting your policy or supplementing it with another type.

The cost of life insurance policies can be influenced by factors such as age, health, and occupation. For example, a $500,000, 20-year term life policy for a male applicant in excellent health may be more expensive than for a female applicant in the same situation.

The cost difference between term and whole life policies can be significant, especially in the long run. Whole life premiums stay the same over time, while term coverage becomes increasingly more expensive with every renewal.

Here's a summary of the main differences in costs between term and whole life policies:

By understanding these factors and considering your options, you can make an informed decision about which type of policy is best for you and your family.

You may be able to switch from one type of policy to another, depending on your needs. This can be a great way to adjust your coverage as your life changes.

For instance, if you already have a term policy, you might be able to convert it into a whole life policy. Companies like Guardian offer this option, and it can help you build cash value that you can borrow against.

Having multiple policies can also be beneficial, such as buying a term policy to supplement your whole life policy. This can provide an added level of protection, like helping to pay for your children's college education.

Protection is a top priority for many of us, and life insurance can provide a financial safety net for our loved ones. Ideally, the length of your term life insurance should match the financial obligation you're covering.

Term life insurance is a great option for new parents, as it can cover you until your child no longer relies on you financially, which is often around 20 years. Most life insurance companies sell term life, so it's easy to find and compare life insurance quotes online.

Worth a look: Symetra Financial Ratings

The death benefit from term life insurance pays out if you die during the term, but if you outlive the term and your coverage ends, your beneficiaries won't receive any money. Most policies are a type of level term life, which means the death benefit and life insurance premiums stay the same throughout the term.

What do you need to know about policy? Let's break it down.

Policy is a set of rules that guide behavior and decision-making in various contexts, including government, business, and personal life.

What is the difference between a policy and a law? A policy is a guideline, whereas a law is a mandatory rule.

Do policies always have to be written down? No, policies can be verbal or unwritten, but written policies are more effective and easier to communicate.

Can anyone make a policy? In most cases, policies are created by organizations or individuals with authority, such as government agencies or company leaders.

How long does a policy typically stay in effect? Policies can be temporary or permanent, and some may have a specific expiration date.

What happens if a policy is broken? Depending on the context and severity of the infraction, breaking a policy can result in consequences, such as fines or disciplinary action.