LIMRA released a finding in September 2025 that adults between 18 and 30 overestimate the cost of a $250,000 twenty-year term policy by ten to twelve times its actual price. The same research put life insurance ownership among Americans aged 18 to 75 at 51%.
Brian Steiner, executive director of Life Happens, connected the two: “Educating consumers about life insurance on social media is no longer a ‘nice to have;’ it’s a ‘must.’ But a lot of financial advice circulating on social media is inaccurate and unreliable.”
Most of that inaccurate advice is about the term-versus-permanent question, and it is usually delivered as a verdict rather than a comparison. The two products do different jobs. Which one belongs in a household depends on what the household is trying to protect and for how long.
What is term life insurance?
A term policy pays a death benefit if the insured dies inside a stated number of years. Ten, fifteen, twenty, twenty-five and thirty year terms are the ones carriers write most often. The premium is level for the whole term. At the end of it, the policy either expires or continues at a much higher annual renewal rate.
Nothing accumulates inside it. There is no cash value, no loan provision and no surrender value. The entire premium buys the death benefit and the carrier’s expenses.
That is also why it costs a fraction of what permanent coverage costs at the same face amount. A forty year old buying a million dollars of twenty year term is buying a very large benefit for a defined window. A forty year old buying a million dollars of whole life is buying a benefit that will still be there at ninety, and paying for the difference.
What is whole life insurance?
A whole life policy covers the insured for life, with a level premium and a guaranteed death benefit. Part of each premium goes into a cash value account that grows at a guaranteed rate, and mutual carriers may credit dividends on top of that. The cash value is the policy owner’s, reachable by loan or surrender, and it is what makes the level premium possible at advanced ages.
Indexed universal life sits between the two. The death benefit is permanent, but the cash value is credited according to the movement of an index, subject to a cap and a floor. The National Association of Insurance Commissioners tightened the rules on how those policies may be illustrated when Actuarial Guideline 49-A took effect at the beginning of 2021.
How do the two compare on cost?
Compare them on what a dollar of premium buys.
Term buys the largest possible death benefit per premium dollar, for a fixed number of years, with no equity left at the end. Whole life buys a smaller death benefit per premium dollar, for life, with an account underneath it that the owner can borrow against.
A household that needs $1,000,000 of protection for the eighteen years until the youngest child finishes college is not choosing between two products. It is choosing between the right amount of coverage and the wrong amount, because the permanent premium on a million dollars would price most families out of the coverage they actually need.
A household that has already funded the temporary need and now wants a benefit that will still exist at eighty-five is in a different position. That need does not end, so a product that ends is the wrong instrument.
What happens at the end of a term?
Three things can happen when a level term period ends.
The policy can lapse, which is what happens most of the time. The premium can continue on an annually renewable basis, which climbs steeply every year and is rarely a long-term answer. Or the policy can be converted.
Conversion is the provision that matters most and gets discussed least. A convertible term policy allows the owner to exchange it for a permanent policy with the same carrier without new medical underwriting. Health that has changed since issue does not matter. Carriers set their own conversion windows, and some end well before the term does, so the deadline belongs in the file the day the policy is issued.
A twenty year term bought at thirty-five with a conversion right that runs to age sixty-five is a different product from one whose conversion right ends in year ten, and the price difference between the two is often small.
What about the cash value?
Cash value inside a permanent policy grows without current income tax. The owner can borrow against it, and a policy loan is not a taxable event while the policy stays in force.
There is a line the funding cannot cross. Internal Revenue Code section 7702A defines a modified endowment contract as a policy that “fails to meet the 7-pay test of subsection (b).” A contract fails that test if the amount paid into it during the first seven contract years exceeds the sum of the net level premiums that would have been required to pay the contract up in seven annual payments.
Once a policy becomes a modified endowment contract, distributions and loans come out on a last-in-first-out basis and are taxable to the extent of gain, with a 10% penalty before age 59 and a half. The death benefit stays income tax free. The living benefits are what change.
A policy designed to be overfunded has to be designed against that limit, not near it. This is the part of an indexed universal life illustration that deserves the closest reading.
Which one should you buy?
Most of the households we write end up with both, in different proportions and usually not on the same day.
The temporary need gets term, because term is the only way to carry a face amount that large at a premium the household can pay every month for twenty years. The permanent need, the final expenses and whatever the household means to leave behind, gets a smaller permanent policy that is not going to expire.
The order matters. Buying a small permanent policy first and leaving the mortgage uncovered is the common mistake. The large temporary exposure is the one that bankrupts a household, and it is also the cheapest one to insure.
Apex holds direct appointments with more than 20 carriers, and every case is quoted across them. The coverage we write runs from ten year term through indexed universal life and annuities. If you want both numbers put side by side for your own household, talk to a licensed agent.
Nothing here is tax advice or an offer of coverage, and no policy is bound until a carrier issues it in writing.
