Life
Term life and whole life solve different jobs
Term insurance rents a death benefit for a set number of years. Whole life keeps a death benefit in force and builds cash value, at a much higher premium.
Life insurance pays a death benefit to the people or trust you name, if the policy is in force when you die. The two products most often compared are term and whole life. They are not expensive and cheap versions of the same thing.
Term
A level term policy charges a set premium for 10, 20, or 30 years and pays if you die during that term. When the term ends, the coverage ends unless you renew, convert, or buy a new policy. Renewal rates after the level period are often much higher. The point of term is a large benefit during the years other people depend on your income: a mortgage, children who are not yet grown, a spouse who would lose a paycheck. Because there is no cash value to accumulate, more of the premium goes toward the death benefit. Healthy applicants can usually buy a large term policy for less than a small whole life policy.
Whole life
Whole life is permanent insurance. Premiums are higher because the policy is designed to stay in force for life and to build cash value under the contract’s schedule. You can often borrow against the cash value. Loans and unpaid interest reduce the death benefit if they are not repaid. Dividends, when a mutual company pays them, are not guaranteed. The policy is a long contract. Canceling it in the early years can return little cash relative to the premiums paid.
A useful question
Ask what expense the death benefit is meant to cover, and for how many years that expense lasts. If the need is temporary, term matches the calendar. If the need is a permanent estate or a buy-sell agreement that should exist whenever death occurs, permanent insurance is the tool people use. Mixing the two, a term policy for the income years and a smaller permanent policy, is common. Illustrations that assume high crediting rates are sales documents. Read the guaranteed columns.
Cover Desk does not quote life insurance and does not know your health or your taxes. A licensed life agent and, where the amounts are large, a tax adviser are the right next step.