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Term Life vs. Whole Life Insurance: Differences and How to Choose
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1.
Ethos
A quick online application process, with no medical exam required.- Coverage for term life insurance ranges from $200,000 to $2 million.
- Draws fewer than the expected number of complaints for a company of its size.
- Excellent rating on Trustpilot, Google and A+ from BBB.
See Details
on Ethos's website
2.
Ladder
- Get $100,000 to $3 million in coverage without a medical exam.
- A mobile-friendly, fully digital experience.
- Issues most term life insurance policies within minutes.
- Adjust your coverage amount at any time.
See Details
on Ladder's website
3.
Fabric
- Simple, 10-minute online application process.
- Offers coverage up to $1.5M without a medical exam and up to $3M with one.
- Access a portion of the policy’s payout early if diagnosed with a terminal illness.
- The mobile app has extra features, like a free tool for creating a will.
See Details
on Fabric's website
Term life vs. whole life: Overview
To better understand the difference between term life and whole life, here’s a quick rundown on how each type of coverage works.
Term life insurance
The way term life insurance works is simple: It covers you for a fixed period of time, such as 10, 20 or 30 years, and pays out if you die during the term. If you outlive the term and your coverage ends, your beneficiaries don’t receive any money. Most policies are a type of level term life; the death benefit and insurance premiums are guaranteed to stay the same throughout the term. A decreasing term life policy is slightly different, and less common. The death benefit gets smaller over the length of the term while the premiums stay the same.
Ideally, the length of your term life insurance should match the financial obligation you’re covering. For example, if you're a new parent, you might buy a 20-year policy to cover you until your child no longer relies on you financially. All of the best life insurance companies sell term life, so it’s easy to find and compare life insurance quotes online.
Term life insurance
The way term life insurance works is simple: It covers you for a fixed period of time, such as 10, 20 or 30 years, and pays out if you die during the term. If you outlive the term and your coverage ends, your beneficiaries don’t receive any money. Most policies are a type of level term life; the death benefit and insurance premiums are guaranteed to stay the same throughout the term. A decreasing term life policy is slightly different, and less common. The death benefit gets smaller over the length of the term while the premiums stay the same.
Ideally, the length of your term life insurance should match the financial obligation you’re covering. For example, if you're a new parent, you might buy a 20-year policy to cover you until your child no longer relies on you financially. All of the best life insurance companies sell term life, so it’s easy to find and compare life insurance quotes online.
Ethos
- A quick online application process, with no medical exam required.
- Coverage for term life insurance ranges from $200,000 to $2 million.
- Draws fewer than the expected number of complaints for a company of its size.
- Excellent rating on Trustpilot, Google and A+ from BBB.
See Details
on Ethos's website
Whole life insurance
Whole life insurance is the most common type of permanent life insurance and costs more than term life. This is because most policies offer coverage that matures late in life—at 90, 100 or 120 years old, in some cases. Whole life insurance also has a cash value component. A portion of your premium goes toward the cash value, which can grow over time. Once you’ve built up enough cash value, you can borrow against it or surrender the policy for cash.
Although it’s more complicated than term life, the way whole life insurance works is more straightforward than other types of permanent life insurance. Premiums remain level and the cash value grows at a guaranteed fixed rate. The death benefit is also guaranteed, but be mindful of taking out cash value loans or withdrawals without paying them back. While you’re not required to repay them, your insurer will subtract any outstanding loans or withdrawals from the final death benefit paid out to your beneficiaries. Many whole life insurance policies are “participating” policies, which means you may earn dividends based on the company’s financial performance. You can use your dividends in a few different ways — including boosting your policy’s cash value.
Whole life insurance is the most common type of permanent life insurance and costs more than term life. This is because most policies offer coverage that matures late in life—at 90, 100 or 120 years old, in some cases. Whole life insurance also has a cash value component. A portion of your premium goes toward the cash value, which can grow over time. Once you’ve built up enough cash value, you can borrow against it or surrender the policy for cash.
Although it’s more complicated than term life, the way whole life insurance works is more straightforward than other types of permanent life insurance. Premiums remain level and the cash value grows at a guaranteed fixed rate. The death benefit is also guaranteed, but be mindful of taking out cash value loans or withdrawals without paying them back. While you’re not required to repay them, your insurer will subtract any outstanding loans or withdrawals from the final death benefit paid out to your beneficiaries. Many whole life insurance policies are “participating” policies, which means you may earn dividends based on the company’s financial performance. You can use your dividends in a few different ways — including boosting your policy’s cash value.
