Term vs. Whole Life Insurance

The many different types of life insurance can make it difficult to choose the best plan to give your family peace of mind.

Term Life Insurance

Term insurance guarantees to pay your beneficiaries if you die before the end of a specified period of time. You can buy a policy with term of 20 years or 30 years. By then, your kids are grown, your mortgage paid off, your spouse close to retirement.

However, if you die after the term expires, your beneficiaries collect nothing. If your policy was intended to replace your income, your family is probably okay. If they are now facing estate taxes, long-term care, or you had wanted to leave a bequest — a whole life policy may have been a better choice to protect your family.

Whole Life Insurance

Whole life — a type of permanent life insurance, sometimes called cash value insurance — pays your beneficiaries when you death occurs up until the maturity date (age 100 or 120). If your beneficiaries need cash beyond your income, a whole life policy can provide it.

Choosing What’s Better for You

  • Things to think about when choosing between the two:

It’s not so much a case of term vs whole life. Neither type of coverage is better than the other. The better choice depends on your reason for buying coverage and what you can afford.

Cash value policies cost more, but part of that money will be invested or credited at a certain interest rate. Also, that money will grow over time tax-free until paid out as a death benefit. In most cases, beneficiaries pay no tax on that money as well! The policy will build cash value if premiums are paid. You will pay more into a whole life policy, but someday, it will pay out to someone. If you need money during your lifetime, you may be able to access the cash value component through a policy loan or withdrawal.

In contrast, a company is likely not to have to pay out your term policy — you might outlive the term! Comparable term insurance is less expensive because of this time limit.

  • Tools that can help you decide

With information about your income, age, and family, an independent agent can help you decide which type of insurance is better for you.

  • A graphic of the differences in features and cost
      Term Insurance Whole Life Insurance
    Lower cost  
    Expires at end of term  
    Builds cash value  
    Death benefit usually tax-free
    Offers policy loans  

Talk to Life Insurance Professionals Today

We would love to answer your questions about term life insurance and whole life insurance. Give Monarch Insurance Partners a call!


What happens if you live longer than your term life insurance?

Term life insurance covers you only for a set period. After that period, coverage expires.

What happens to whole life insurance at age 100?

Most whole life policies mature at age 100 or 120. The value of the policy is paid out to the policy owner at that time and will likely be subject to income taxes.

Can you switch or exchange an insurance policy?

Check to see if you can convert your term policy to whole life, or your whole life to a reduced/paid up amount. Sometimes a whole life policy can be exchanged for a new one. Buyer beware! It may cost more, especially if your health has changed.

Are insurance policies taxable?

Death benefits paid to beneficiaries are usually not subject to income tax. An independent agent has strategies to help avoid estate taxes as well.

Guarantees are based on the claims-paying ability of the issuing life insurance companies.