If you buy a Whole (Permanent) Life that costs $902 per year and pay the premium for “your whole life,” or to age 100 (you can’t pay any more premium after age 100), you will have paid $90,200 during your life time. Part of that will go to pay the cost of insurance which becomes increasingly higher in your senior years. Your premium, however, will not change as the higher cost of insurance in later years is built into the policy. In addition, the amount over the cost of insurance and annual fees will build a cash value which will equal the face value (called “endow” ) when you reach age 100. Let’s just assume that you are going to pay the premium to age 100.

Now back to the Term. In the first 20 years, you will have paid $3,700 to have something with no value whatsoever except in the case of your death. At the end of 20 years you will be 50 and will suddenly realize that your insurance is about to increase in price, or expire unless you convert it to whole life—in which case, it will still increase in price. If you simply renew it, your annual price in year 21 jumps from $185 to $1,085.99. That's a 586% jump! And it doesn't stop there.

Here are the current approximate annual rates just for years 21 through 30, (your age 51 – 60) which will vary from company to company, but are quite representative.

Year 22………$1180
Year 23………$1288
Year 24………$1412
Year 25………$1550
Year 26………$1704
Year 27………$1872
Year 28………$2050
Year 29………$2248
Year 30………$2470

Add those figures to the $3,700 of the first 20 years, and you have now spent $19,474 for a Term policy over a 30 year period. Still not bad, since the whole life numbers would be at $27,060 in the same 30 years. It gets even more dramatic, however. If you keep renewing the Term, at age 70, your premium is $7,348 for just that one year. At age 80, it is $19,636, and at age 90, you will pay a whopping $45,471 for the insurance for that year alone. With the whole life, you would still have been plunking down the same $902 per year. In fact, by the time you reach age 73, you will have paid over $95,000 for the now annually renewable Term, exceeding the maximum life time premium of a whole life policy—and for something that cannot be renewed at any price after age 95. (Some Term Life Policies actually mature at age 85.) For the forward thinking person, a whole life is beginning to look a lot more attractive.

Of course, you don't have to renew the Term; you have the right to convert the policy to any other type of policy the company offers—with no medical underwriting. So, providing you chose a company that offers BOTH term and whole life, you could convert the term at its first maturity date of 20 years—your age 50. Although prices fluctuate with time, the annual price for a $100,000 policy for a 50 year old non-smoking male is around $2000, give or take a couple hundred for different companies. That means that if you live to age 100, the whole life policy will have a life time premium of $100,000 on top of the $3700 you already paid for the now worthless Term. Remember if you had started with a whole life at age 30, your entire lifetime premium would have only been around $90,000. With the lower cost of insurance in the early years, your heirs would thus always have a benefit higher than the total premium you have paid.

In short, Term Life is not a life long value. It does, however, have its place. If your primary purpose is to provide support for your family or to pay off a large debt in the event of pre-mature death, a Term Life can be sufficient. A person purchasing Term life needs to know that he or she will have retirement assets sufficient for final expenses, and that he does not need or wish to leave a life insurance legacy for his heirs. But for a policy with life long value that keeps on building, you need whole life.