Term vs. Whole Life Insurance


How to Choose Between Term vs. Whole Life Insurance

3 min read
Oct 17, 2019

Having a life insurance plan is critical to provide your family peace of mind and a financial safety net. But it can be confusing choosing between the two types, term life insurance and whole life insurance. How do you know which is best for you?

Term life insurance offers protection for your loved ones for a specified period of time and often supplements a permanent plan. Whole life insurance policies (also called permanent policies) do not expire — they are intended to provide protection for your entire life. Some types of permanent life insurance policies accumulate cash value.

Each plan type may have pros and cons depending on your needs. Read on to find out which may be right for you.

How does term life insurance work?

With this option, your insurance premiums last for as long as the term you select — this can be for as little as one year and up to 30 years. Most insurance companies offer policies in increments of 5 or 10 years, so you can get coverage for 5, 10, 20 or 30 years, for example. Once the term runs out, you’ll have the option to continue coverage, but at a higher premium. Term policies pay death benefits to your beneficiaries if you die during the period covered by the policy.

Sometimes, it is possible to convert a term life policy into a whole life policy, but it depends on the insurance provider and their terms and conditions. Ask your advisor when considering options for life insurance.

How much does term life insurance cost?

Term life insurance is often the most affordable, because the rate of your premium is locked in for the term you select. Payments are made monthly or yearly. The amount of your premium varies according to your health and other factors. Term life insurance premiums will be lower than premiums for most whole life insurance policies, which last a lifetime and build cash value.

What is whole life insurance?

As the name implies, whole life insurance covers you for your whole life, provided you continue to pay your premiums. Whole life insurance typically comes with guaranteed level premiums — the amount will never change as long as premiums are paid.

Whole life insurance policies pay death benefits (proceeds after death) and they may also build cash value.

What does “cash value” mean?

Cash value is the additional money you can contribute (above the cost of the insurance plan) that can grow tax-deferred as an investment. Contributions to a cash value option allow you to build a reserve that you may have access to through loan and withdrawal options.

How much does whole life insurance cost?

The amount you pay will depend on how much coverage you want. Also factored into the cost are your age, gender and health, among other considerations.

So, should I buy term or whole life insurance?

Generally, you should consider a term life insurance policy to:

  • Get valuable coverage at competitive rates
  • Help cover specific financial responsibilities like a mortgage or college expenses
  • Supplement a permanent policy or policy through your employer

Consider a whole life insurance policy if you want:

  • Portable protection for life
  • Level premiums that stay the same each year
  • To contribute additional money above the cost of insurance into the policy on a tax-deferred basis
  • Cash value you can use during your lifetime

Please keep in mind that these are simply guidelines. Learn more about MetLife’s insurance options and speak with a trusted financial professional to assess your needs.

Nothing in these materials is intended to be advice for a particular situation or individual. These materials are for general information purposes only.