ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Traditional Whole Life Vs Term Life

Updated on August 9, 2021
travishelmboldt profile image

Travis has been a husband and father for over 15 years. Served in the Army National Guard for 10 years. Currently a life insurance agent.

Traditional Whole Life Insurance or Term Life Insurance? Do you know which one you may need?


Traditional Whole Life

Traditional whole life insurance policies are policies that will mature at the age of one hundred. These policies begin to accrue a cash value at the policy’s third year. The percentage of the cash value accumulation varies with each company. The premiums are slightly higher than that of a term life insurance policy and of a final expense whole life insurance policy. In layman’s terms, whole life insurance is exactly that, whole life. The premiums are based on the client’s current age, health conditions, and gender at the time of purchase. The cash value can be borrowed against. But, the loan must be paid off in a timely manner. If the client dies before the debt is paid, the debt will be deducted from the death benefit. As long as the premiums are paid, the policy will remain in effect for the duration of the client’s life, or until the client’s one hundredth birthday. The rate will never increase, and nor will the benefit ever decrease, regardless of the client’s increasing age and potential age-related health issues while having the policy.

There are some riders that can be attached with an additional expense to the premium to a traditional whole life policy. These riders include;

  • Long term care
  • Accelerated death benefit
  • Child or grandchild benefit
  • Accidental death benefit
  • Waiver of premium
  • Disability income benefit
  • And others

The cash value, sometimes called interest can be cashed out to pay for college tuition or buying a house. If a traditional whole life insurance policy is cashed out and is not used for the purpose of paying for college tuition or buying a house, the IRS will charge a heavy tax burden of around 20%. Only the cash value can be cashed out, and not the death benefit.

When the insured dies, the beneficiary will have to pay taxes on the policy's current cash value. The death benefit will not be taxed, as long as the beneficiary chooses the lump sum payment option. There are other payment options the beneficiary can choose, but, anything other than the lump sum option will be taxed as earned income by the IRS. This is also true for all life insurance policies, regardless of the type.

Medical Examination and Blood Drawn for High Face Amounts

High face amounts will require a client to undergo a physical examination and have their blood drawn for testing in a lab. Each carrier will have their own requirements for blood testing and health examinations. This is true for any insurance type regarding high face amounts.


Term Life Insurance Policies

Term life insurance policies cover a specified amount of years. Whether it be a ten-year, twenty-year, thirty-year, or even a forty-five-year term. A term life insurance policy is sometimes referred to as a temporary insurance policy. Because, a term policy only covers a portion of one’s lifetime.

The rates for a term insurance policy typically are cheaper than a traditional whole life policy.

Term insurance policies will not accrue a cash value. But, they do offer some riders that can be attached to a policy with an extra charge to the premium. These riders include;

  • Return of premium
  • Accelerated death benefit
  • Accidental death
  • And others. Just to name a few.

If the client outlives the term policy, they will be out of all of that money paid to the insurance company, if the client did not have a return of premium rider attached to the policy. Since a term policy’s rates are based on the client's current health conditions and age at the time of issue, if the client elects to purchase another term policy, the rate will increase to reflect the current status of the client’s health and age.

Some companies allow for the term policy to be converted to a related policy. Such as; traditional whole life, final expense whole life, or even an indexed universal life policy.

Term policies often are used to protect the loss of income or as mortgage protection. The client will choose what the death benefit is the protect and what the amount will be. If it is a mortgage protection, it will be the amount of the mortgage or a portion thereof. If it is income protection, it will be the insured’s annual salary, times the amount of years the insured wants to protect the household. Mostly, it is around four or five years. Sum this figure up with the amount of years the insured plans to work until retirement.


Term life insurance is temporary. And will only cover a portion of someone's life. The premiums are cheaper than that of traditional whole life. Traditional whole life will cover the entirety of someone's life, or until their one hundredth birthday. The premiums are slightly higher than that of term life. And the policy will begin to accrue a cash value, starting at the policy's third year. The choice is completely up to you as to which one you decide.


Disclaimer: It is not the intention for this article to sell a particular product or to endorse a product or company.

© 2018 Travis Helmboldt


This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

Show Details
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
ClickscoThis is a data management platform studying reader behavior (Privacy Policy)