Term life vs. whole life.
In plain English
Term life insurance covers you for a fixed period, often 10, 20, or 30 years, and pays out only if you die during that term. Because most terms end with no payout, it is inexpensive. Whole life is permanent: it never expires as long as you pay, and part of each premium goes into a cash value that grows slowly and can be borrowed against. That structure makes whole life cost many times more than the same face amount of term. The standard framing is coverage-for-a-need versus a permanent policy with a savings component, and the two are priced worlds apart for the same death benefit.
01Why it matters
The premium difference for the same coverage is large, and people typically weigh the low cost and fixed window of term against the lifelong coverage and cash value of whole life, so comparing them on the same face amount is what makes the tradeoff visible.
02The math, step by step
A healthy 30-year-old might pay a few hundred dollars a year for a 20-year, 500,000 dollar term policy. A whole life policy with the same 500,000 dollar death benefit can cost several thousand dollars a year, because part of every premium funds the cash value and the coverage never expires. Same payout on death, very different yearly cost and structure.
Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.
03What this is NOT
This is not advice for your situation. Term is not automatically better and whole life is not automatically wasteful. The right fit depends on how long the need lasts, your budget, and whether you want a permanent policy with cash value. This page shows the mechanics, not what you should buy.
04Receipts
Every figure on this page is sourced to a primary document. Tap to open the original.