Which type of life insurance policy typically has lower premiums than whole life?

Term life insurance is designed primarily to provide coverage for a specific period, typically ranging from one to thirty years. One of the distinctive features of term life insurance is that it generally offers lower premiums compared to whole life insurance. This is primarily due to the fact that term policies do not accumulate cash value; their sole purpose is to provide a death benefit if the insured passes away during the term of coverage.

Unlike whole life insurance, which includes both a death benefit and a savings component that builds cash value over time, term life insurance focuses solely on the risk of mortality during the specified term. Therefore, because term policies do not include this cash value component and only provide coverage for a limited time, they can maintain significantly lower premium rates, making them a more affordable option for those seeking life insurance coverage without the frills of investment components or lifelong guarantees.

In contrast, the other types of insurance listed—endowment policies, universal life, and variable life—tend to have higher premiums due to their investment components, greater flexibility, and the cash value accumulation aspect, which means the policyholder is paying for additional benefits beyond basic life coverage.