Term life insurance is temporary coverage with premiums that increase at predetermined intervals, while whole life insurance is permanent protection with level premiums and living benefits, such as cash-value accumulation and loan privileges, according to the New York Life Insurance Company. Term life is often convertible to whole life.
Though term life policies have a guaranteed, level death benefit, the premiums increase in one-, five-, 10- and 20-year intervals, depending on the policy, notes the New York Life Insurance Company. Term life premiums are substantially less expensive than whole life, allowing policyholders to carry coverage with a higher death benefit at much lower costs. This makes term life insurance attractive to policyholders who need a high level of coverage, such as a couple with children. Many life insurance policyholders supplement their whole life policies with term life during high-need years.
Whole life policies can never be canceled as long as the policyholder pays his premiums, explains the New York Life Insurance Company. Built-up cash value can be accessed through a loan and used for expenses such as a down payment on a home, children's education and retirement income. If a whole life policy is issued by a mutual company, policyholders are eligible to receive dividends, which increase the cash value.