What’s the Difference Between Term and Whole Life Insurance?

Mar 21, 2025 3 min read

It’s smart to purchase life insurance. It helps protect your loved ones’ future and can ensure that you leave a legacy of care behind. No matter what stage of life you’re in, it’s wise to carry a life insurance policy.

But there’s more than one type of life insurance, and no solution is one-size-fits-all. Term life insurance, whole life insurance and universal life insurance all provide protection, but they work differently. Understanding what sets them apart from one another can help you choose the right one for you. We’ll break down term vs. whole vs. universal life insurance and the pros and cons of each to help you determine what might best fit your family’s needs.

Start with our Life Insurance Calculator to get a picture of what you might need – and how much it could cost.

Term Life Insurance: Set Duration & Lower Cost

Here’s a simple way to think about term life insurance: it is, essentially, temporary coverage. This policy type is designed to provide a guaranteed death benefit to your beneficiaries should you pass away during the term of your coverage. With this coverage type, your premiums remain fixed for the policy’s term — that is, a set number of years. You can opt to continue coverage when the term runs out, but the premiums may increase. 

Term policies are appealing because they generally have a low premium, creating an affordable way to get financial protection for your family’s future. Because of the lower cost, term life policies are an attractive option for younger people and families.

Whole Life Insurance: Lifetime Coverage and Cash Value

Whole life insurance is a type of permanent life insurance. It offers protection for your entire lifetime, as long as the premiums payments are kept current. 

One major benefit of a whole life insurance policy is that you’ll have coverage for life. You enter into a contract when you purchase the policy, so you won’t have to worry about the premiums increasing as you grow older. 

With a whole life insurance policy, you also accumulate as you pay your premiums. Later in life, after your cash value has accumulated, you have the option to borrow against your policy for estate planning or other financial needs.1

Typically, the premiums payments on a whole life policy are higher than on a term policy. That means that this option may be more attractive to those who can achieve multiple goals with one policy. For example, for people who want to use the policy’s accumulated cash value to create a supplemental income for costs like final expenses, long-term care, retirement or keeping a business in the family. It can also serve as an inheritance vehicle for children or grandchildren.

That’s not to say that young or single people can’t benefit from whole life insurance. Premiums are set when the policy is purchased, and because younger and healthier people pay less for life insurance, getting a whole life insurance policy when your younger will result in lower premiums for life. 

Policyholders who already have term life insurance can convert their term life policy to a whole life policy to take advantage of the cash benefits, though premiums will be affected. 

Universal Life Insurance: A Flexible Alternative

Another form of permanent life insurance is universal life (UL) insurance, which differs from whole life insurance by offering flexible protection and flexible payments. Universal life insurance is more customizable; you can add a benefit that will pay for care if you need it, and you can choose to fund at a maximum limit to take full advantage of tax benefits. 

In a way that is similar to whole life policies, UL policies build an accumulated value based on your premium payments. You can borrow against the accumulated value while you’re still living for things like purchasing a home, starting a business or even creating supplemental income for your estate planning. However, because your payments are flexible, universal life insurance policies aren’t as set-and-forget as whole life policies; its important to regularly review your account value to ensure that your premiums are able to maintain the coverage you want.

Find the Right Fit for You 

Your life insurance needs change over time. We can help you choose the right type of life insurance that fits through all of life’s changes. Each option differs in price and coverage characteristics, but all serve as financial protection for those who matter most to you. No matter which type of coverage you choose, life insurance premiums are almost always lower when you’re younger and healthier, so don’t wait. Contact your Farm Bureau agent to discuss your specific life insurance needs.

1 Any loans from the policy’s cash value will reduce the policy’s cash value and death benefit if the borrowed funds, plus interest, are not repaid by the time of your death. Further, if your life insurance policy is classified as a Modified Endowment Contract (MEC), distributions, including loans, may be taxed less favorably than non-MEC policies.

Neither the Company nor its agents give tax, accounting or legal advice. Consult your professional adviser in these areas.

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