Same US$100,000 cover: US guide example puts whole life at about US$1,800 a year, term at about US$250

Take two 35-year-olds, each with US$100,000 of death cover. One whole life policy costs about US$1,800 a year; a renewable term life policy costs about US$250. This is the example the National Association of Insurance Commissioners (NAIC) uses on its consumer page to compare the two, a gap of US$1,550 a year.

One point first: this is an illustration on the page, not a current market quote. We checked the page on 30 October 2026, and it carries no publication or update date. Still, the gap raises a real question: what does the extra money buy?

This article draws on consumer material from the NAIC, the New York State Department of Financial Services (DFS) and the Financial Consumer Agency of Canada (FCAC). It applies only to the United States and Canada, is current as of October 2026, is general information, and does not recommend any product or company.

Life insurance falls into two broad types: term and cash value

The core of life insurance is simple: when the insured person dies, the insurer pays the named beneficiary, which can be a person or an organisation. The NAIC divides life insurance into two types: term life, and life insurance with cash value, which is further split into whole life, universal life and variable life.

Term life: lower price, but cover has an end date

Term life covers a set period, such as 10 or 20 years. In Canada, the FCAC says the term can also run to a given age, such as 65. A claim is paid only if the insured person dies within the term; once it ends, cover stops.

Price is its strength. The NAIC says term life generally has the lowest premiums in the early years and gives the highest amount of cover for each dollar of premium. The trade-off is just as clear: there is no cash value. The FCAC adds that term life cannot be borrowed against, and surrendering the policy brings no refund.

Cheap term cover may not stay cheap when renewed. Many term policies can be renewed, but premiums often rise, and some policies cannot be renewed after a certain age. The NAIC advises checking the new premium before renewing.

Whole life: part of the extra money becomes cash value

Whole life is a permanent policy that gives long-term cover. The NAIC says its savings component is the reason premiums are usually higher. The FCAC says whole life premiums do not change with age and that such policies usually carry a guaranteed minimum cash value.

How cash value grows differs from policy to policy: some start slowly and speed up later, while others build up gradually. The NAIC advises asking the agent for a year-by-year table of values, which should also be attached to the policy.

Cash value is not an extra payout. The NAIC says beneficiaries generally receive only the death benefit, less any unpaid policy loan plus interest; only some whole life policies pay both the death benefit and the cash value. The FCAC also warns that the cash value you get back on surrender will be less than the premiums paid, and that an unpaid policy loan reduces the death benefit or the surrender proceeds.

Universal life: flexibility rests on assumptions

The FCAC describes universal life as combining insurance with an investment account, with cash value that can rise or fall depending on investment choices and returns; if returns fall, premiums may rise. Another NAIC consumer article also says that for many cash value policies, premiums depend on the insurer's investment returns, claims costs and expenses.

A consumer alert issued by New York's DFS on 21 February 2019 is more direct, though it is New York material and does not apply across the United States. It says most universal life policies do not offer long-term guarantees on premiums, cash value or cover. Premiums are often set on assumptions about future interest rates or market performance, and if actual returns fall below those assumptions, policyholders may have to pay more. If premiums plus cash value are not enough to pay the policy's charges, the policy will lapse, and internal charges may rise year by year.

Before you buy, ask yourself three questions

1. How much of the household income depends on you?
2. Will these responsibilities change over time?
3. For how many years do you need death cover?

As for the amount, the NAIC notes that some experts suggest five to eight times current income, but the page argues for reviewing it according to actual need, taking in final expenses, debts, children's education, dependants, estate tax and inflation.

Questions to put to the agent

• Are premiums payable on a fixed schedule?
• Does the policy have cash value, and does it change each year?
• Which parts of the premium or policy value are not guaranteed, and is there a guaranteed minimum?
• What will the premium be after a term policy is renewed?
• In New York, read the illustration and disclosure documents; the law allows one free in-force illustration a year, and there is a free-look period of at least 10 days with a full refund.

Details that are easy to miss

• Buying online is not necessarily cheaper: the NAIC says premiums are often the same whether you buy through an agent or online.
• Riders cost extra premium, for example waiver of premium, accidental death benefit, guaranteed insurability, long-term care, and early access to the death benefit in terminal illness.
• Do not buy life insurance unless you intend to keep it, because surrendering early can be costly; nor should you drop an existing policy before you have thoroughly reviewed the new one.
• Cheques should be made out to the insurance company, not the agent; you can also check with your state insurance department whether the agent and company are licensed.
• The FCAC advises counting cover already provided by an employer or an old policy, naming a contingent beneficiary, and reviewing beneficiary arrangements regularly.

The key is the length of cover, not the name

Term life buys cover for a period at lower cost; whole and universal life tie cover to savings or investment, charging higher premiums in return for cash value and for more terms that need to be understood. Working out how many years of cover you need matters more than picking a policy type first. The DFS advice is plain: if you do not understand it, do not buy it. For personal circumstances or tax arrangements, consult a licensed professional where you live.

Prices and details correct as of October 2026

This article is general information, not investment, tax or insurance advice. Everyone’s circumstances differ; consult a licensed professional before making decisions.