Term vs. whole life insurance: What are the differences?

What's the difference between term and whole life insurance?

The key differences between term life insurance and whole life insurance generally come down to four factors: cost, coverage length, cash value, and complexity.

So, which is better — term or whole life insurance? The pros and cons of term and whole life insurance are clear: Term life insurance is simpler and more affordable but has an expiration date and doesn't include a cash value feature. Whole life insurance is more expensive and complex, but it provides lifelong coverage and builds cash value over time.

Choosing between the two will come down to your specific needs and financial situation.

How does term life insurance work?

Term life insurance provides affordable coverage for a set period, typically 10 to 30 years, and pays a death benefit to your beneficiary if you die while the policy is active. It may be right for you if you're looking for low-cost coverage or if you only need protection for a specific time. It has no cancellation penalty if you no longer need coverage. Term life insurance can also work alongside whole life insurance for added protection.

Here's how term life insurance can fit your life stage:

• Young adults: Term life insurance may provide affordable protection while starting a career, paying off student loans, or planning for a family.
• Mid-career individuals: Term life insurance may be useful for covering large financial responsibilities, like buying a home, welcoming a child, or getting married.
• Retirement planning: Term life insurance may help address short-term needs, like paying off debts or supplementing other policies.

How does whole life insurance work?

Whole life insurance provides lifelong coverage as long as you pay your premiums. No matter when you die, your beneficiary will receive the death benefit payout. It also has a cash value savings component that builds in value over time, which you can use to pay your premiums or borrow against in the form of a life insurance loan. If you take money out or borrow from your policy's cash value and don't pay it back, it will lower the cash value and the amount your beneficiary gets.

Here's how whole life insurance can fit your life stage:

• Young adults: Whole life insurance may give you the ability to lock in lower premiums early while building cash value long-term.
• Mid-career individuals: Whole life insurance may be a way to create a financial safety net for your family and build savings for the future.
• Retirement planning: If you want insurance that can cover end-of-life expenses, leave an inheritance, or provide support for loved ones who need ongoing care, whole life insurance may be the right choice.

Can I switch from term life insurance to whole life insurance later?

Yes, you can switch from term life insurance to whole life insurance later if your term policy includes a conversion privilege or rider. This allows you to convert some or all of your term coverage to a whole life policy without a new medical exam. Check your policy details — your insurer typically sets deadlines for conversions, which must be made before the term policy expires.

Is Progressive life insurance term or whole life?

Progressive offers both term life and whole life insurance options through our trusted provider eFinancial, making it easy to find a policy that fits your needs.

Not sure how much life insurance you need? Use our life insurance calculator to estimate your coverage based on factors like your age, income, and more.

Alternatives to term and whole life insurance

There are other types of life insurance you may consider that offer more options or fit a specific need:

• Universal life insurance: Like whole life, universal life insurance offers lifelong coverage, but it offers you greater flexibility. For example, you can adjust or skip premium payments, as well as change your death benefit amount.
• Variable life insurance: Variable life insurance also lasts for your entire life and includes a guaranteed death benefit, but the cash value component grows based on specific investments you select. This policy type is a bit riskier than others and carries additional fees.
• Indexed universal life insurance (IUL): Another form of universal life insurance, only with this policy type your cash value grows based on the performance of a set grouping of stocks. As with variable life, IUL is riskier than traditional whole and universal life policies.
• 1-year term life insurance: Meant for short-term coverage gaps, such as being in between jobs, one-year term life policies can give you low-cost coverage while you look for a new job or figure out your long-term coverage needs.

If you're still unsure what type of life insurance is right for you, call 1-866-912-2477 to speak with a licensed Progressive Life by eFinancial representative. They'll offer advice, show you your options, and let you compare quotes.