The short answer
This guide answers the most common questions about how to compare term life quotes.
Term vs whole life insurance is the classic life insurance question. Term covers a set number of years at a lower price. Whole life lasts for life and builds cash value, at a higher price.
This guide lays out the differences and shows how to decide, including the common choice of using both.
Part of our complete guide: Term Life Insurance: The Complete Guide.
Quick answer
Term: lower cost, set length, no cash value. Whole life: lifelong coverage and cash value, higher cost. Convertible term keeps the door open to permanent coverage later.
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How to compare term life quotes: how term life insurance works
Term life insurance covers you for a set number of years, such as 10, 20 or 30. If you pass away during the term, the policy pays a death benefit to your beneficiaries. If you outlive the term, the coverage ends and nothing is paid.
Because it does not build cash value, term is usually the most affordable way to buy a large amount of coverage. It fits needs that have an end date: a mortgage, raising children or replacing income until retirement.
How underwriting works for term life insurance
Every life insurance application goes through underwriting. That is the insurer's review of who you are, how healthy you are and how much risk the policy carries. The result is your rate class, which sets your price.
- Your answers. Health history, medications, tobacco or nicotine use, family history, travel and hobbies.
- Records. Prescription history, a shared database of prior insurance applications, and often your driving record.
- Sometimes an exam. A short visit from a paramedical examiner to check height, weight, blood pressure and lab samples.
- Sometimes medical records. For larger amounts or certain conditions, the insurer may ask your doctor's office for notes.
Insurers do not all weigh these things the same way. One carrier may treat a managed condition, like controlled blood pressure, more favorably than another. That is a big reason to compare several carriers rather than accept the first offer.
Be complete and honest on the application. Policies have a contestability period, usually the first two years, when the insurer can review a claim against what you said when you applied.
Compare rates from several carriers in about two minutes. Free, no obligation.
What happens when term life expires?
When the term ends, the coverage stops. You will not get your premiums back unless you bought a return of premium policy. Most policies give you options before then.
- Convert to permanent coverage, if the policy allows.
- Renew year to year, usually at a much higher price that rises each year.
- Buy a new policy, if your health and needs justify it.
- Let it end, if the need is gone.
What to watch out for
Most problems with life insurance come from a few avoidable mistakes:
- Choosing a term that ends before the debt or need does.
- Replacing a policy you already own before the new one is issued.
- Naming a beneficiary without a backup, or never updating it.
- Picking riders you do not need and paying for them for years.
- Skipping the comparison step and accepting the first price you see.
Tip: Keep a copy of your policy and tell your beneficiaries where it is. A policy nobody knows about cannot help anyone.
What sets the price for this search
- Age: the younger you are when you apply, the lower the rate.
- Health class: from your application, records and any exam.
- Tobacco: usually the single biggest factor after age.
- Coverage amount and term length: more money and longer terms cost more.
- Riders: extras like return of premium or disability waivers add to the price.
How to get covered in 3 steps
- Check your rate. Pick your state and answer a few quick questions about the coverage you want.
- Compare carriers. A licensed agent compares term life insurance options from several insurers and explains the trade-offs.
- Apply and get covered. Many applications take one phone call. Coverage starts once the policy is issued and the first premium is paid.
A worked example
Say you're 34 with a $150,000 mortgage balance and 16 years left, $19,000 in other debts, and an income of $55,000. Here's one simple way to size coverage:
| Item | Amount |
|---|---|
| Mortgage balance | $150,000 |
| Other debts | $19,000 |
| 4 years of income | $220,000 |
| Total to consider | $389,000 |
In this example, a 20-year term would outlast the loan (it ends around age 54). Your own numbers will differ; use this as a starting point and adjust for savings, other coverage and future costs like school.
Is term life right for you?
Often a good fit
- Parents with children at home. Homeowners with a mortgage. Anyone whose income supports others. People who want a lot of coverage at a lower price.
Maybe not the right fit
- People who need coverage for life, such as for final costs or estate planning. People who want cash value they can use later. In those cases, permanent coverage may fit better.
