Ask the Life Insurance Expert

What is the difference between term life and whole life insurance, and do either of them have a cutoff age to expire?

Term life and whole life differ in a number of important ways. The biggest difference is that term life is temporary, and whole life is permanent insurance.

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Term life pays a death benefit to your beneficiaries if you die within the policy's term, which could be 10, 15, 20, 25 or even 30 years. You choose the term when you buy the policy, and the coverage expires when the term ends or you stop paying premiums. You can also choose to buy a term conversion rider, which lets you convert the term policy to permanent insurance without undergoing another medical exam. However, you must make a decision to convert your policy within a specified period time outlined in your policy.

Whole life provides coverage for the rest of your life. As long as you keep up with the premium payments, whole life pays a death benefit to your beneficiaries, no matter when you die.

Another big difference: whole life features cash value that grows over time. You can withdraw money from or borrow against the cash value account, but you must repay the money plus interest otherwise the death benefit will be reduced and your beneficiaries will lose out on some of the life insurance proceeds when you die.

Because whole life is permanent and features the cash account, it is much more expensive than term life. Most life insurance buyers choose term life for its affordability, and time the length of term to correspond with the years they're raising children and paying off the mortgage and other major debts.

For more, see life insurance basics.

 

Last updated: Jun. 19, 2011
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