Term and whole life insurance both pay a tax-free amount to your family if you die. The difference is how long the cover lasts, what it costs, and whether the policy builds value along the way. Here's how to decide which one fits your family.
Term life: protection for the years you need it most
Term life covers you for a set period β commonly 10, 20 or 30 years. If you pass away during that time, your beneficiaries receive the death benefit. If the term ends and you're still alive, the coverage stops (or renews at a much higher price).
- Lower cost: for the same amount of coverage, term is usually far cheaper than permanent insurance β especially when you're young and healthy.
- Matches temporary needs: a mortgage, young children, or replacing your income until retirement.
- No savings component: you're paying purely for protection.
- Often convertible: many term policies let you switch to permanent coverage later without a new medical β a valuable option if your health changes.
Whole life: permanent cover that builds value
Whole life lasts your entire life as long as premiums are paid. Premiums are usually level, and part of what you pay builds cash value inside the policy, which grows over time and can be borrowed against.
- Lifetime protection: the death benefit is paid whenever you die β at 55 or 95.
- Estate planning: useful for leaving a guaranteed inheritance, covering taxes owed at death (for example on a cottage, rental property or investments), or funding final expenses.
- Higher cost: premiums are significantly higher than term for the same death benefit.
- Participating policies may also pay dividends, which can buy more coverage or reduce premiums. Dividends aren't guaranteed.
A simple way to decide
Ask yourself one question: is the need temporary or permanent?
- Temporary needs β the mortgage, raising children, replacing income for 20β25 years β are usually best covered by term.
- Permanent needs β leaving a legacy, paying taxes at death, supporting a dependant with a disability for life, or business succession β point to whole life (or universal life, which adds investment flexibility).
Many families use both: a larger term policy for the high-need years, plus a smaller permanent policy for the estate.
Mistakes we see often
- Buying too little coverage because the premium looked high β a common starting point is enough to clear debts plus several years of income.
- Waiting: premiums are based on your age and health when you apply. A new diagnosis can make coverage expensive or unavailable.
- Not reviewing the policy after marriage, a new child, a new home or a business.
- Not disclosing medical history accurately β this can put a future claim at risk.
Every family's numbers are different. If you'd like, we can compare term and permanent options from several insurers side by side β read more on our term life and whole life pages, or ask an advisor.
This article is general information, not personal financial, tax, legal or immigration advice. Rules and limits change β confirm details with an advisor or the official source before you decide.
