What are the benefits of whole life and term life insurance?

Term life insurance is temporary coverage with premiums that increase at predetermined intervals, while whole life insurance is permanent protection with level premiums and living benefits, such as cash-value accumulation and loan privileges, according to the New York Life Insurance Company. Term life is often convertible to whole life.

Though term life policies have a guaranteed, level death benefit, the premiums increase in one-, five-, 10- and 20-year intervals, depending on the policy, notes the New York Life Insurance Company. Term life premiums are substantially less expensive than whole life, allowing policyholders to carry coverage with a higher death benefit at much lower costs. This makes term life insurance attractive to policyholders who need a high level of coverage, such as a couple with children. Many life insurance policyholders supplement their whole life policies with term life during high-need years.

Whole life policies can never be canceled as long as the policyholder pays his premiums, explains the New York Life Insurance Company. Built-up cash value can be accessed through a loan and used for expenses such as a down payment on a home, children's education and retirement income. If a whole life policy is issued by a mutual company, policyholders are eligible to receive dividends, which increase the cash value.