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The Difference Between Whole vs. Term Life Insurance

By: Benefits by Design | Tuesday June 8, 2021

Updated : Wednesday November 16, 2022

There are a number of different Life Insurance products available to Canadians. So much so that it can be unclear which is best for you, or even what the differences are. Today, we’re focusing on two types seen often in group insurance: Term Life Insurance and Whole Life Insurance.

Looking for more general information on Life Insurance? A Guide to Life Insurance

Term Life Insurance provides a benefit for a specified period of time, often expressed as a termination age. After which, coverage may be reduced or cease entirely, depending on plan design. Most group Life Insurance policies fall under this category, as do many Individual or Optional Life Insurance policies.

Premiums paid for Term Life are generally less expensive than many other types of Life Insurance. This is because the risk of a claim is lower, since the policy only covers a specified period of time. 

What is Whole Life Insurance?

Whole Life Insurance, sometimes known as Permanent Life Insurance, provides protection until the covered person’s death. There is no termination age

As a result, Whole Life premiums are generally more expensive than Term Life premiums. The Insurer knows they will eventually have to pay out the full benefit value of the policy. Therefore, premiums are based on the age the covered person becomes approved for coverage.

For example, a person who purchased a Whole Life Insurance policy at age 30 would pay less in monthly premiums than a person who purchased the same policy at age 50. Since these premiums do not increase over time, there are advantages to purchasing Whole Life Insurance earlier in life.

Did you know? As a concept, Life Insurance has been around for a long time, dating all the way back to ancient Roman times. Citizens would pool their money together to form “burial clubs”, which would pay for funeral and burial expenses, and even take care of surviving dependents.

What is the Difference Between Whole and Term Life Insurance?

There are a number of key differences between Whole and Term Life Insurance. Here are some of the main ones:

What is the Group Life Insurance Claim Process?

Should I Get Life Insurance?

Ultimately, the purpose of Life Insurance is to help those left behind after a loss of life mitigate the financial burden and possible debts that arise. Both Whole and Term Life Insurance achieve this goal, and the type of coverage that’s best for you will vary widely by circumstance.

Everything You Need to Know About Optional Life Insurance

There are many factors that play a role in the amount and type of coverage needed, such as age, lifestyle, and whether you have dependents. Generally speaking, Life Insurance is a viable benefit for individuals with dependents who rely on them to provide an income. For example, the need for income replacement for a 30-year old with a mortgage, car payment, spouse, and two children may differ from a fifty-five year old whose mortgage is paid off and whose dependent children have left the home.

This is not a hard-and-fast rule, but is a general guideline. Each individual’s situation is different and the only person who can truly know if they need Life Insurance is you!

Still have burning questions? Find more answers with our Guide To Life Insurance!

A Guide to Life Insurance