Term vs Whole Life Insurance for Seniors

The difference between term vs whole life insurance may be confusing for some, but we’re going to clear it up with this quick and easy-to-understand guide. This guide aims to help you understand how each of these types of life insurance differs, so you can make an informed decision on which is right for you.


There are so many different forms of life insurance out there, and it can be a true challenge trying to pick and choose the policies that are going to protect you and your loved ones. Life insurance itself is an umbrella term that encompasses many different types of coverage. For seniors, this may include term, whole life, final expense, and burial insurance, among others. Luckily, however, the differences between whole vs term life insurance are easy to understand, and once you do, you should be able to make a well-informed decision between the two.


So, what is the difference between term and whole life insurance? Let’s jump into an easy-to-understand comparison between term and whole life insurance, the pros and cons of each, and how to decide which is right for you.

ready to plan cta

Need Life Insurance Protection?

Our unique term life solution is designed for individuals aged 50+ and provides the coverage you need to financially safeguard your loved ones. Our life insurance solutions are affordable and instantly accessible - even at this stage of life.

  • No Medical Exams
  • Instant Approval
  • Purchase Today - 100% online

By answering a few simple questions, you’ll have a personalized coverage solution that matches your specific needs in just minutes. 

section description

Why Life Insurance Matters to Seniors

Life insurance is often thought of as a product for younger adults with families full of dependents and young mortgages as well as credit card debt. This insurance product offers a way to leave financial security behind for their dependents in the event that anything happens to them. However, life insurance offers a lot of advantages for seniors, as well, and there are many reasons why.


First, of course, is that times are changing, and retirement doesn’t always look the same way it used to. We have a much longer life expectancy these days, requiring retirees to budget for many more years without employment income. Many seniors are close to exhausting their retirement savings, and life insurance can provide some insulation in this scenario. Your life insurance may offer accelerated benefits in the event of terminal illness, and you may be able to borrow against the cash value of the policy if in need of funds. Seniors may also consider selling their life insurance policy, though they will never receive the amount of the death benefit itself when they do.


Seniors are also increasingly taking on dependents as they help to raise their grandchildren and assist their adult children with an ever-increasing cost of living. When we still have financial dependents in our later years, i

t means we have to think about what happens to them in the event we pass on. Life insurance provides us with the ability to leave them with financial stability.


An increasing number of seniors are also carrying mortgage debt into their retirement years as well. The increasing cost of living sparked a spike in using equity to pay off debt and make ends meet. Our adult children are finding it increasingly difficult to pay for their own housing and continue to live at home, which means that when we pass, we need to ensure that the mortgage is taken care of.


The reasons why life insurance matters to seniors seem to multiply as each day passes, so it’s important to know the difference between whole life insurance and term life insurance. These are two of the oldest types of life insurance available, making them tried and true methods of securing stability for your family's future.


Term life insurance allows you to lock into a price for a specific period of years, after which the policy will lapse, or you can renew it with a renegotiated cost. Whole life insurance doesn’t expire as a term life insurance policy does, and you’ll pay the same premiums until you pass on. Both types of life insurance policies enable you to achieve some peace of mind knowing your family will be taken care of after you’re gone, but let’s take a closer look at the differences between whole life insurance vs term life insurance.

section description

Term Life Insurance

Term life insurance is an insurance policy that offers coverage for a certain period of time, otherwise referred to as a term. Dependent upon your age, you can purchase this form of life insurance for terms of 10, 15, 20, or 30 years. Term life insurance tends to be more affordable than whole life insurance in the long run.


When you purchase term life insurance, it will be valid for the term of the policy. That means that if you purchase a 15-year term life insurance policy, you will have life insurance coverage for those 15 years. You’ll also pay the same premium for the entire 15-year term of the policy. However, once the term is up, the policy expires. You will have the option to renew it, but the premiums will be renegotiated based on your current circumstances. Fifteen years will have passed since you first purchased the policy, so your premiums are likely to increase as a result of your higher age and, often, changes to your health.


However, because the insurance provider has the ability to renegotiate the premiums after your term is up, and because your term life insurance has no cash value until after you’ve passed, you’ll often find that your premiums will be lower than they might be with whole life insurance. If you do not renew your policy, it will lapse, and you will no longer have that coverage.

section description

Whole Life Insurance

Whole life insurance is a form of life insurance policy that lasts for the rest of your life. You’ll get the same premiums throughout, but they are sometimes higher than your premiums with term life insurance. The higher premiums are due to the fact whole life insurance policies have a cash value. That means that part of the premiums you pay gains interest over time, helping that cash value grow. Your gains on these investments are tax-deferred, so you won’t pay taxes on them. The cash value of your whole life insurance offers a number of benefits, including the ability to borrow against it in times of financial need. You can also surrender your whole life insurance policy in exchange for the cash value should you need an influx of cash for any reason.


Whole life insurance policies might also earn annual dividends that add to your policy’s cash value.


With whole life insurance, sometimes referred to as permanent insurance, your premiums will remain the same for life, as does the coverage. You will never have to renegotiate your premiums to continue the same coverage. As long as you pay your premiums, you will be covered with a guaranteed death benefit.

section description

What Seniors Should Know About the Difference Between Term and Whole Life Insurance Policies

We’ve put together a quick and easy to reference chart to answer the question, “what is the difference between whole and term life insurance?” to help you make an informed decision about which type of life insurance is right for you. Here is a quick comparison between term and whole life insurance.

Term Life Insurance

Whole Life Insurance

Coverage is lifelong

No

Yes

Lower Premiums

Yes

No

Policy has a cash value

No

Yes

Customizable policy length

Yes

No

Guaranteed death benefit

Yes

Yes

Possibility for annual dividends

No

Yes

Premiums stay the same for life

No

Yes

Premiums stay the same for the term of policy

Yes

Yes

section description

What’s the Cost Difference Between Term and Whole Life Insurance?

So, what is the difference between term and whole life insurance when it comes to the cost of the policy? Your premiums with whole life insurance are generally going to be significantly higher due to two factors. First, your policy accumulates a cash value, and second, the policy lasts your whole life. On the other hand, term life insurance is temporary and doesn’t accumulate a cash value, making the premiums much more affordable. The price difference between whole and term life insurance can be significant.


The cost of any form of life insurance will also increase as you age. If you purchase a life insurance policy at age 40, you’re going to get much lower premiums than you will purchasing a life insurance policy at age 65. Generally speaking, you’ll be paying your premiums for a shorter amount of time. Your gender will also impact the cost. Premiums for women are lower as men have a lower life expectancy. Health is also a key factor in determining cost.


To break it down even further, let’s look at the whole life insurance vs term cost averages and how age might affect it. The figures represent annual premiums for a $500,000 policy. Let’s compare term vs whole life insurance:

Term Life Insurance - 20 years

Whole life Insurance

40-year-old Female

$289

$5,467

40-year-old Male

$341

$6,388

50-year-old Female

$654

$8,347

50-year-old Male

$840

$9,875

As you can see, the difference between whole and term life insurance premiums are quite significant. However, the increased cost of whole life insurance comes with potential annual dividends and a growing cash value against which you can borrow or surrender your policy in exchange for, should you need it.

section description

Advantages and Disadvantages of Term vs Whole Life Insurance

What is the difference between term and whole life insurance when it comes to pros and cons? Which type of insurance comes with the best advantages? The answer to that question, of course, will depend on the many different variables that define your unique circumstances. Let’s look at what those pros and cons are, the difference between term and whole life insurance policies, and how they might affect you and your beneficiaries.


Term life insurance pros:

  • Term life insurance often comes with significantly lower premiums, making this form of life insurance policy more affordable.
  • Term life insurance comes with a guaranteed death benefit, which means that if you pass during the term of the policy, your beneficiary will always get the whole death benefit amount.
  • Term life insurance is flexible, so you can customize your policy to better reflect your needs. You can choose your coverage amount, term length, and you might even be able to select some riders that can give you additional coverage.
  • Term life insurance is uncomplicated. With no cash value and simple to understand terms, this form of life insurance is simple.


Term life insurance cons:

  • With term life insurance, your coverage ends at the end of the policy term, and if you do not renew it, you walk away with nothing.
  • Term life insurance has no cash value. That means you can’t borrow against it or surrender the policy for the cash value in times of financial need.
  • If you choose to renegotiate your term life insurance after the original term expires, your premiums will go up due to your greater age and any changes in your health.


Whole life insurance pros:

  • Whole life insurance offers coverage for life. Unlike term life insurance, your whole life insurance will last as long as you continue to pay your premiums.
  • Whole life insurance comes with a guaranteed death benefit, so no matter when you die, your beneficiaries will receive the entire death benefit amount.
  • Your premiums with whole life insurance will stay the same for life. There is no need to renegotiate at any point.
  • Your whole life insurance policy will accumulate a cash value against which you can borrow. You may also have the opportunity to surrender your policy for its cash value should the financial need arise.


Whole life insurance cons:

  • Premiums for whole life insurance are high, which means it may be less affordable, especially if you’re purchasing a policy as a senior.
  • Whole life insurance is less flexible than term life insurance, as you can’t choose the policy term.
section description

Term Life Insurance vs Whole Life Insurance — Which is Best For You?

There are upsides and downsides to both forms of life insurance, but each pro and con when we compare term vs whole life insurance will carry a different weight for different people depending on their unique circumstances. What’s right for you will depend on your age, your health, your budget, and much more.


For instance, if your budget doesn’t allow for much more than the premiums with term life insurance, your decision is already made for you. For many, term life insurance is their only option because it is more affordable.


However, if you’re looking for something that is more of an investment that will provide you with borrowing options in retirement or the opportunity to fall back on the cash value you’ve accumulated, then whole life is a much better option for you.


Let’s jump in and take a closer look at why you might choose one over the other.


Why Seniors Should Choose Term Life Insurance

There are several reasons why seniors might choose term life insurance over whole life insurance. They include:

  • Term life insurance comes with significantly more affordable premiums, making this option more appealing to those on a tighter budget.
  • If you’re looking for a shorter-term solution that will provide your beneficiaries with financial stability in the wake of your death, then term life insurance is a great choice for you.
  • If you’re not interested in an investment opportunity and just want a straightforward life insurance policy.
  • You may be able to convert your term life policy into a whole life policy later.


Why Seniors Should Choose Whole Life Insurance

Whole life insurance is a great choice for many different reasons and in different scenarios. Here are the reasons to choose whole life insurance over term life insurance:

  • When your budget allows for a bit more wiggle room, choosing whole life insurance may be better for your circumstances.
  • If you want to purchase insurance that accumulates a cash value and gives you more options for maintaining financial stability in your senior years.
  • If you have beneficiaries and dependents who rely on you for financial stability, whole life insurance can serve as an inheritance and will pay out no matter when you die. It’s a solution for those who need something permanent.
section description

How to Get Term or Whole Life Insurance

Both whole life insurance and term life insurance have similar application processes. A great place to start with either is by asking different insurance providers for quotes. You can also throw in a few other questions to get a good idea of which provider you like best.


If you’re looking for term life insurance, ask whether or not you’ll be able to convert your term life insurance policy into a whole life policy later. You can also clarify the length of terms to choose from and what riders might be made available for added coverage. A rider offers additional coverage for specific needs. For instance, you may be able to add a Chronic Illness rider, which can offer coverage for medical treatment, long-term care, and other costs.


If you’re shopping for whole life insurance, make sure to review your budget so you know how much you’ll be able to afford to pay each month and ensure your premiums come in under that.


Once you settle on a quote you like, you’ll want to get your documents in order. You’ll need to provide your insurer with information about any existing life insurance you may already have. You will likely have to go over your medical history and potentially give access to your medical history over to the underwriter. You may also need to answer some questions about your family’s medical history. Finally, you’ll have to prove your age and place of residence during your application process.


Most life insurance providers will also require some form of physical examination to confirm your current health status before you’ll know if you’ve been approved. Once that approval does come through, though, you’ll begin paying premiums right away until the end of your insurance term.

section description

Additional Considerations for Seniors Interested in Life Insurance

There are two more important considerations to take into account when deciding between a whole vs term life insurance policy. The first of which is that you can, in many cases, convert your term life insurance into a whole life insurance policy at a later date. This may sway you in favor of purchasing term life insurance now for its affordability knowing you have the opportunity to convert it later to get all the benefits of a whole life insurance policy — it is important to remember, however, that the cost of insurance increases with age so you will be converting it at a much higher premium.


A second consideration when thinking about the difference between term life insurance and whole life insurance is that you may wish to purchase a term life insurance policy to supplement your whole life insurance. You can earmark the death benefit of each for something different. One may be used to continue to pay off your mortgage so your dependents will still have a home, and the other could be used as a fund for your children’s or grandchildren’s education. Having a term life insurance policy as well as a whole life insurance policy is an affordable way to supplement your existing life insurance as it builds cash value.

section description

Start Planning Your Coverage Today

There is a lot to think about when choosing between term vs whole life insurance for seniors. Even though we’ve answered the question, “what is the difference between term and whole life insurance?” it can be challenging to choose. With so many variables including your budget, your age, your health, and what coverage amount you want, it can quickly become overwhelming.


That’s why it’s so important to do your homework and research all the available options there are. That way, when the time comes, you will be able to make an informed decision about the type of life insurance protection that works best for you.

ready to plan cta

Experience a new level of insurance

Whether you’re retiring, planning for your care, or seeking financial security for your family - we’ll help you design the ideal plan just for you.

Our content is created for educational purposes only. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Everdays encourages individuals to seek advice from their own investment or tax advisor or legal counsel.

Disclaimers

The Everdays mark and the Everdays logo are registered trademarks of Everdays, Inc.
This app is owned and operated by Everdays, Inc., a Delaware corporation doing business in California as Everdays Moments Insurance Marketing.
MI license #012475; CA license #6000079