Term vs. whole life insurance

The NAIC^[1][2] describes term life as a policy bought for a period of time that pays the beneficiaries if the insured dies during the term, and is “intended to provide lower-cost coverage for a specific period.” Most term policies don’t build cash value. Florida’s Office of Insurance Regulation likewise describes term as insurance for a specified period at a lower cost.

Many term policies can be renewed at the end of the term even if your health has changed, but the NAIC says the new premiums are higher; ask what they’ll be and whether you lose the right to renew at a certain age. Some can be converted: State Farm says you can convert any of its term coverage to permanent coverage regardless of health status (options vary by state and, for some policies, by age), and Northwestern Mutual says its term policyowners can convert some or all of their coverage to whole life.

For a sense of scale, State Farm’s term page showed sample Select Term rates of $15.02 a month for 10 years, $15.22 for 20 years and $19.14 for 30 years, each for $250,000 of coverage, for a 25-year-old woman in excellent health in Illinois (Nov 10, 2026). Your price depends on your age, health and state.

Whole life is a type of cash value (permanent) insurance. The NAIC^[1][2] says you typically pay whole life premiums on a set schedule, and that in some cash value policies the values are low in the early years and build later. Because of the savings element, premiums for permanent insurance tend to be higher.

State Farm describes its whole life policies as offering level premiums and coverage for as long as you live, provided premiums are paid, with cash value that grows tax-deferred. Policy loans accrue interest, and outstanding loans and interest reduce the death benefit and cash value. Its policies may earn dividends, which are not guaranteed. Northwestern Mutual says its whole life cash value is guaranteed to grow and that premiums, once set, won’t go up.

The NAIC notes that when you die, beneficiaries generally collect no more than the stated death benefit, regardless of cash value, minus unpaid loans and interest; some whole life policies pay both.

Universal life is another cash value type; the NAIC^[1][2] says it lets you choose a flexible premium pattern as long as you pay enough to keep the policy in force. Variable life ties cash value to investments you choose, usually mutual funds. The SEC’s Investor.gov^[4] says you can lose money in a variable life policy, including your initial investment, that substantial fees and taxes generally make it unsuitable for short-term savings, and that the policy can lapse if cash value can’t cover fees.

The NAIC^[1][2] calls this “a popular sales slogan” and gives an illustration: a $100,000 death benefit at age 35 with a $1,800 annual whole life premium against a $250 annual renewable term premium. Its cautions: term premiums rise as you age, the strategy only works if you actually invest the difference, and if your health worsens you may not qualify for a new policy.

• Does anyone depend on you financially, and for how many years? (NAIC^[1][2])
• Can you afford the premium now and if it rises later?
• Does the policy have a cash value, and which parts of the premium and values aren’t guaranteed? Ask for an illustration.
• If you have coverage through work, is it enough, and can you keep it if you leave?

The NAIC says you can usually return a new policy for a full refund within a review period, often 10 days, and warns not to cancel an existing policy until a new one is in force.

• No one depends on your income. The NAIC’s^[1][2] first question is whether anyone relies on you financially; if not, you may not need a policy.
• You’re weighing whole life mainly as an investment. Compare fees first and read the policy illustration; for variable life, read the prospectus.
• You might replace an existing policy. Don’t cancel it until the new one is in force.