Term vs whole life: the only chart you need.
Two products, two philosophies, one aggressive commission structure. Here is how to pick without getting talked into the wrong one.
The one-line difference.
Term insurance is temporary and cheap. Whole life is permanent, expensive, and includes a savings feature the insurance company mostly manages for you.
A healthy 35-year-old might pay $30/month for a $750,000 20-year term policy. The same person, same coverage, whole life: $600–$900/month. That is not a typo.
Why term exists.
You have big obligations for a finite window: a mortgage until it's paid off, kids until they're launched, a spouse until you've both saved enough for retirement. Term insurance covers exactly that window.
When the window closes, so does the need. Your house is paid, your kids are working, and your retirement accounts can carry your spouse. You no longer need someone else to write a check if you die.
Why whole life is pitched so hard.
Whole life pays the selling agent a first-year commission of 50–110% of the annual premium. Term pays 30–90% of a premium that is 10× smaller. Every agent who eats what they kill has a strong reason to steer you toward whole life.
That doesn't make whole life fraud. It has legitimate uses: estate planning for people with more than ~$14M in assets, funding buy-sell agreements between business partners, insuring a special-needs dependent for life. If you are not in one of those buckets, you probably want term.
“The right answer for 95% of people is a boring, cheap, 20- or 30-year term policy. The remaining 5% already have an estate attorney.”
The 'buy term and invest the difference' math.
The classic advice: buy term, take the money you would have spent on whole life, invest it in a plain index fund, and after 20 years you'll have both a paid-up family and a much larger nest egg than any whole life policy would have grown.
It works. It requires you to actually invest the difference, which some people won't do. If you know yourself and know you won't, that is a real argument for a forced-savings product. Just go in with your eyes open about the fees.
The one chart.
If you're deciding right now:
- →Under 60, have dependents, want to be responsible → term, 20 or 30 years, 10–15× income.
- →Over 60, no dependents, own your home → probably no new coverage at all.
- →Business owner with a partner → talk to an attorney about a buy-sell funded with term or whole.
- →Net worth over $14M → talk to an estate planner about whole or universal life for tax reasons.
- →Everyone else being pitched whole life → get a second opinion.