Life insurance exists to replace your income if you die. Term life provides that protection for a set period (10, 20, or 30 years) at a fixed price. Whole life provides permanent coverage and builds cash value — but at a much higher cost.
Term Life — The Right Default
A healthy 30-year-old non-smoker can get a 20-year, $500,000 term life policy for $25–$35/month. That's the math: pay $600/year to guarantee $500,000 goes to your family if you die in the next 20 years. Whole life would cost $300–$500/month for the same death benefit, with a savings/investment component built in.
What You Get With Term
Pick a term that covers your biggest financial obligations: remaining mortgage years, kids' college costs (estimated 4 years of tuition at today's rates), and income replacement for your spouse. Most people need 10–20 year terms. 30-year terms are for people with older kids who still need 25+ years of income protection.
When Whole Life Makes Sense
Whole life only makes sense after: (1) maxing out 401k to employer match, (2) maxing out backdoor Roth IRA, (3) paying off all high-interest debt, (4) having a fully funded emergency fund, and (5) wanting permanent coverage for estate planning purposes. For a complete breakdown of life insurance types, costs, and when term vs. whole makes sense, a life insurance buyer's guide covers these scenarios in detail.
The Cash Value Trap
Whole life policies take 5–7 years to break even on paid premiums vs. cash value. If you cancel in year 3, you get back almost nothing. Agents who sell whole life as an investment typically have high commissions (50–80% of first-year premium). Caveat emptor.