Guide · Life & health insurance
Term life vs. whole life insurance
The two basic types of life insurance are term and permanent. The right one depends on how long you need coverage and what you want to spend.
6 min read · Last reviewed 2026-10
The basics
The NAIC explains that term insurance is intended to provide lower-cost coverage for a specific period, while cash value insurance, such as whole life and universal life, may be more cost effective if you want coverage for your lifetime. Most term policies do not build cash value.
The NAIC also notes that you may combine cash value life insurance with term insurance for the period of your greatest need for life insurance to replace income.
| Term life | Whole life | |
|---|---|---|
| Coverage period | A specific period, such as 10 or 20 years | Designed to last for life if premiums are paid |
| Cash value | Most term policies have none | Builds cash value |
| Premiums | Usually lower than permanent coverage at the start | Higher than term for the same benefit |
| At the end | Coverage ends unless the policy lets you renew or convert | Coverage continues under the policy terms |
Renewing and converting
Most term coverage can be renewed at the end of the term, but the NAIC says renewal premiums are higher. Some term policies include a conversion option that lets you change to a permanent policy later. Check the contract for the conditions and any fees.
How to choose
- Decide how long people would depend on your income or need the money.
- Get quotes for the same benefit amount on term and permanent coverage so you can compare.
- Ask for a written illustration for any permanent policy and read the fees and assumptions.
- Check conversion and renewal terms on term policies.
Questions
Which is better, term or whole life?
Neither is better in every case. Term can fit a need with an end date, and permanent coverage can fit lifelong needs. The right choice depends on your goals and budget.
Does universal life work like whole life?
Both are permanent, cash value types. Universal life generally offers more flexibility in premiums or benefits, and the details vary by product.
Sources
Informational only. Rules and policy terms change and differ by state and insurer. Confirm details with your policy, your insurer or your state insurance department.
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