Episode 117 

Term Life vs. Whole Life Insurance: Which One is Best? 

Life insurance is an important aspect of your overall financial plan. With so many options available, how do you know which one is best? Tune in to learn about the two most common types of life insurance and which one is best for your circumstances. 

Term Life Insurance  

As the name implies, a term life insurance policy is purchased for a specific term, which can range from 10, 15, 20, or 30 years. This is considered the simplest method of life insurance that can be purchased; however, it only pays out if the policyholder dies within the term. Ideally, the term should closely match the financial obligation the policyholder is trying to cover. For example, I often advise parents, and term life insurance policies make the most sense when they would rather cover the expenses of their child up to a certain age.  

Whole Life Insurance  

Whole life insurance policies allow the policyholder to buy coverage for life. Unlike a term life insurance policy, a payout is guaranteed. What makes these policies unique is 2 main components. The first being the death benefit and the second being a cash account that allows the policy to grow in value over time. The second component is often seen as attractive to policyholders because they’re allowed to take loans from their own policy. However, whole life policies are much more expensive than term life policies. So, when does it make sense to have a whole life policy? There are various circumstances where a whole life policy may make sense. For example, parents who have children with disabilities may purchase a whole life policy because a guaranteed payout means a continuation of funds to provide care for their loved one.  

Differences in Premiums 

Here’s an example of how much annual premiums compare for a $500,000 policy of term life insurance vs. whole life insurance.  

20-Year Term Life Insurance

  • Male, 30 | $229 |
  • Female, 30 | $193 |

30-Year Term Life Insurance 

  • Male, 30 |$358| 
  • Female, 30 |$300|  

Whole Life Insurance 

  • Male, 30 | $4,308 | 
  • Female, 30 | $3,802 | 

Source: https://www.nerdwallet.com/article/insurance/term-vs-whole-life-insurance 

Key Takeaways  

It’s important to think of your goals when considering which type of life insurance you need. One is not necessarily better than the other, because at the end of the day everyone’s situation is different and insurance policies must be purchased in a well-thought-out manner. If you’d like to better understand the pros and cons of these insurance policies relative to your unique situation, consider gaining expert guidance from a CFP® professional.  


In this episode, Luis speaks about the following and more: 

  • When you need life insurance 
  • Term Life vs. Whole Life 
  • A Little-Known Type of Term Insurance 
  • Buying Term and Investing the Difference