The core difference
Term life insurance covers you for a fixed period — typically 10, 20, or 30 years. If you die during that term, your beneficiaries get the payout. If you don’t, the policy expires and you get nothing back. That’s it.
Whole life insurance covers you permanently and includes a « cash value » component that grows over time. You can borrow against it or surrender it for cash. It sounds better. It costs 5 to 15 times more.
The real-world numbers
A healthy 30-year-old non-smoker can get a $500,000 term policy (20 years) for roughly $25–$30/month. The same person would pay $400–$500/month for a comparable whole life policy. The difference — $370+/month — invested in a basic index fund over 20 years would likely outperform the cash value component by a wide margin.
When whole life might actually make sense
- You have a lifelong dependent (a disabled child, for example)
- You’ve maxed out every other tax-advantaged account and need another vehicle
- You’re a high-net-worth individual using it for estate planning
For everyone else — and especially for anyone in their 20s or 30s with a young family — term life is almost always the right call.
How much coverage do you need?
A common rule: 10–12 times your annual income. A 35-year-old earning $60,000 should aim for $600,000–$720,000 in coverage. This ensures your family can replace your income, pay off the mortgage, and fund education without financial crisis.
Disclaimer: This article is for informational purposes only. Consult a licensed insurance professional for personalized advice.