On average, whole life insurance policies are significantly more expensive than term life insurance. Research by finder.com found that the average monthly premium for a whole life insurance policy could range from hundreds of dollars a month to over a thousand, depending on factors such as the level of coverage and the age and gender of the insured.
In contrast, premiums for term life insurance average in the tens of dollars for most insured, although they can be higher for those of advanced age and higher policy limits.3
What Is the Difference Between Whole Life and Term Life Insurance?
As its name suggests, term life insurance provides a death benefit for a specific term. This type of life insurance, unlike a whole life policy, does not have a saving component. At the end of the term, the policy terminates. Some insurers allow the policyholder to covert their term policy to whole life or renew for a longer term. Whole life insurance is a type of permanent life insurance that provides coverage for the life of the insured. A whole life insurance policyholder can also build cash value in the savings component of the policy.
What Is the Difference Between Universal and Whole Life Insurance?
Universal life insurance and whole life insurance are both permanent life insurance types that offer guaranteed death benefits for the life of the insured. However, a universal life policy allows the policyholder to adjust the death benefit as well as the premiums. As one might expect, higher death benefits require higher premiums. Universal life policyholders can also use their accumulated cash value to pay premiums, provided the balance is sufficient to cover the minimum due. Whole life insurance, alternatively, does not allow for changes to the death benefit or premiums, which are set upon issue.
How Much Is Whole Life Insurance?
The cost of whole life insurance varies and is based on several factors, such as age, occupation, and health history. Older applicants typically have higher rates than younger applicants. Insureds with a stellar health history typically have better rates than those with a history of health challenges.
The face amount of coverage also determines how much a policyholder will pay; the higher the face amount, the higher the premium. Interestingly, certain companies have higher rates than others, independent of the applicant and their risk profile. It's also worth noting that for the same amount of coverage, whole life insurance is more expensive than term life insurance.
Variable Whole Life Insurance Is Based on What Type of Premium?
Variable life insurance premiums can be fixed or variable, allowing the policyholder to remit a premium payment of no less than what is required to cover fees and expenses (e.g., mortality and expense (M&E) fees). As cash value builds, through the remittance of premiums and accumulation of interest, the net risk to the insurer decreases.
As a result, associated fees and expenses may decrease, reducing the minimum premium needed to cover such charges. Alternatively, some insurers outfit their policies with a lapse protection feature, which prevents the policy from lapsing due to insufficient cash value as long as certain level premiums are paid over a specific period.4