Term insurance vs whole life insurance: What’s the difference?

Term and whole life insurance are two of the most common types of life insurance, but they’re designed to solve different needs. At a high level, both can provide a death benefit to help financially protect your loved ones when you pass away. The key difference comes down to how long coverage lasts.

When comparing term insurance vs whole life insurance, term life insurance is coverage for a set period—the “term.” Whole life insurance, on the other hand, is a permanent policy designed to last your lifetime, with premiums that generally stay the same and living benefits like cash value. Understanding how term and whole life insurance work can help you choose coverage that fits your goals, budget, and the length of time you want to help protect your loved ones.

What is term life insurance?

Term life insurance offers coverage for a set period, such as 10, 15, 20 or 30 years. For the initial term you choose, premiums remain level. If that initial term ends and you still need coverage, DreamSecure Choice Term Life Insurance may be renewed on an annual basis through its Annual Renewable Term feature, with premiums increasing each year you renew.

If you pass away while the policy is in force, it can help financially support the people who matter most to you.

What is whole life insurance?

Whole life insurance is a type of permanent life insurance designed to provide long-term coverage. It helps provide financial protection for the people who matter most to you when you pass away, and it comes with premiums that remain the same over time. It may also build cash value, which is a living benefit that can grow over time.

This can make it a good fit if you want long-term coverage. Learn more about DreamSecure Whole Life Insurance from American Family Life Insurance Company.

Key differences between term and whole life insurance

When comparing term and whole life insurance, the biggest difference is how long coverage lasts and what features come with the policy. Term life insurance is designed to help protect your loved ones for a set period, often with lower premiums. Whole life insurance is designed for lifelong coverage and may include living benefits like cash value.

If you’re deciding which coverage is more right for you, it can help to think about your timeframe and priorities—such as whether you want coverage for a specific stage of life or long-term protection that can last for your lifetime. The chart below walks through common factors people weigh, including term vs whole life insurance pros and cons.

One important difference is how premiums are structured. With term life insurance, premiums are level during the initial term you choose. If coverage continues after that initial term through an annual renewal option, premiums can increase each year. Whole life insurance, by contrast, is designed for long-term coverage and has premiums that remain the same over time.

The chart below shows the key differences between term and whole life insurance policies from American Family Life Insurance Company (AFLIC).

Reasons to consider term vs whole life insurance

There are several reasons someone might choose term or whole life insurance, and the right option often depends on your goals, budget and how long you want coverage in place. If you’re wondering which is better, it can help to compare what you need the policy to do.

Why consider term life insurance?

Term life insurance can be a practical option when you want coverage in place for a specific period. This can make it a good fit when you have temporary needs—like a mortgage you’re working to pay off, protecting young kids, or replacing income until they’re grown and more financially independent.

It can also be a good starting point if you’re focused on getting coverage in place with a budget in mind, while still helping provide financial protection for your family if you pass away during the term.

You may consider term life insurance if you want:

• Coverage for a specific initial term (for example, 10, 15, 20 or 30 years)
• Premiums that are typically lower during the initial term than permanent coverage options if the policy has Annual Renewable Term (ART)
• Coverage that aligns with time-limited goals (like income replacement or paying off a loan)
• The option to continue coverage after the initial term; renewal is automatic with a higher premium after initial term

Why consider whole life insurance?

Whole life insurance may be worth considering if you want coverage designed to last for your lifetime, not just a set number of years. Among term and whole life insurance policies, whole life is often chosen by people who prefer long-term financial protection in place for their loved ones when they pass away.

Whole life insurance may also include living benefits like cash value. For some people, those features can be helpful—especially when planning for long-term needs.

You may consider whole life insurance if you want:

• Coverage designed to last your lifetime
• Premiums that typically remain the same over time
• Long-term coverage that isn’t tied to a specific term length
• A policy that may build cash value over time
• Coverage that fits into broader long-term goals

Alternative to term and whole life insurance

Term and whole life insurance are two common choices, but they aren’t the only options. Depending on your goals, budget and how long you want coverage in place, another type of policy may be a better fit. For example, flexible life insurance may appeal to people who want long-term coverage with more flexibility in how the policy is structured.

Still not sure what’s right for you? Speak with an agent.

Term and whole life insurance policies can both provide a death benefit for the people who matter most to you. One of the biggest differences is how long coverage lasts and how premiums work. Term life insurance is designed for a set period, while whole life insurance is designed for long-term coverage and may include living benefits like cash value. If you’re still not sure which option fits your goals, budget and timeline, an American Family Insurance agent can help you compare your options.

This is a brief description of coverage and is subject to policy and/or rider terms and conditions, which may vary by state. The words lifetime, lifelong and permanent are subject to policy terms and conditions.

1. 1. This article provides a general description of term and whole life insurance and their differences. Talk to an agent to learn about the life insurance policies underwritten by American Family Life Insurance Company.
2. 2. After the initial term, DreamSecure Choice Term Life Insurance can be renewed with increased premiums for additional one-year terms of coverage, up to the policy anniversary on or after the insured’s 95th birthday.
3. 3. Life insurance underwritten by American Family Life Insurance Company, 6000 American Parkway Madison, WI 53783