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Comparing Term vs. Whole Life Insurance


While the primary purpose of owning a life insurance policy is to protect your family from the financial impact of your death, not all life insurance policies are the same. That’s why it’s important to understand the difference between term and whole life insurance and to recognize that they are designed differently to meet specific needs. Whether you purchase a term policy, a whole life policy, or, like most military families, both, you need to consider several factors, including your budget, your age, your health, and your goals to get the correct coverage mix for your situation.

Term Life Insurance vs. Whole Life Insurance

Life insurance is designed to help provide financial support for your family when you pass away, including money for burial expenses, medical bills, mortgage payments, lost wages, and providing for your children’s future. However, in some cases, regardless of whether you choose term life insurance, whole life insurance or both, your policy may include features and benefits that do even more.

Here are the key differences between term and whole life insurance:

What Is Term Life Insurance?

Term life insurance has a low monthly cost per dollar amount of insurance, but it only provides coverage for a fixed amount of time — typically 10, 20, or 30 years — at that same monthly rate. The longer the policy term, the higher the monthly rate will be, but the rate won’t increase during that term no matter your age or health situation.

AAFMAA offers a variety of term life policies, including these two popular options:

Level Term I is designed for servicemembers, spouses, and children ages 18-49 years old. The unique aspect of this policy is that the premium will never increase, but the policy will run out at age 60. However, before age 48, you can convert 100% of the initial face amount of your plan to our five-year renewable term policy without any additional medical underwriting. You can also convert it to our Value-Added Whole Life policy for the current in-force face amount at any time without additional medical underwriting.

Our Level Term II policy is a more traditional flex term policy designed for Veterans and their spouses, ages 18 to 75.

What Is Whole Life Insurance?

Whole life insurance is more complex than term life, and more expensive per dollar of coverage, but it also provides additional benefits. Whole life is a type of permanent life insurance, meaning it provides lifelong coverage until you die (unless you cancel the policy), not just for a specific time period or term. Whole life insurance also builds a cash value, which slowly increases in a tax-deferred account so that you don’t pay taxes on it unless you withdraw some or all of the funds. As with other life insurance policies, the death benefit paid upon your death to your survivors is tax free.

Here are some of AAFMAA’s popular whole life options:

Value-Added Whole Life is a traditional whole life policy for Veterans, spouses, and children up to age 80, and grandchildren under age 26.

Wealth Builder Life Insurance is one plan with four retirement solutions built in. Veterans, spouses, and adult children of Members can get up to $1,000,000 of coverage by making a one-time premium payment of $785 per $1,000 of insurance coverage. There are no upfront fees or commissions to reduce your initial investment and your savings continues to earn money for you at industry-leading crediting rates, without exposure to the market risks of other retirement products. And, with no surrender charges, you can withdraw your money any time with no penalties from AAFMAA. Your money is yours — always.

ANNUITYLife® gives Veterans, spouses, and adult children of Members everything they want from an annuity, and nothing they don’t. Veterans and their family members in or approaching retirement can convert their retirement savings into a stream of income they will never outlive — without the startup costs, fees and hidden commissions that are common among traditional annuities.

Term vs. Whole Life Pros and Cons

 When deciding on term life insurance vs. whole life insurance, each option has positives and negatives. The right choice really depends on your individual needs and circumstances, and most military families find that they actually need some of both to be fully covered.

Term Life Insurance Pros

  • Low monthly premiums for high levels of coverage
  • Premiums do not increase for the length of the term

Term Life Insurance Cons

  • Coverage for a set amount of time, after which the policy expires with no residual value

Whole Life Insurance Pros

  • Permanent coverage that never expires, despite your age or health
  • Premiums will never increase
  • Death benefit is guaranteed
  • Builds tax-deferred cash value that you can borrow against or redeem in whole if necessary

Whole Life Insurance Cons

  • Higher premiums per dollar of coverage
  • Loans must be repaid, with interest, or your total insurance benefit will decrease

Find Your Perfect Life Insurance Coverage with AAFMAA

Selecting the right life insurance coverage mix for your needs — which likely means a balance of term and whole life coverage — should be simple and affordable. Contact an AAFMAA Membership Coordinator to learn more about our term and whole life insurance options, or get a free, no-obligation quote online today.

Common Questions

Yes, your AAFMAA policy will cover a death related to COVID-19 if you are an existing AAFMAA Member with a policy issued more than two years ago or prior to a COVID-19 diagnosis, even within the first two years the policy is owned. The only exclusion on AAFMAA policies is death by suicide within the first two years.

However it is important to note that death claims made against an underwritten policy issued within the last two years are contestable, regardless of the cause of death. Contestable death claims are reviewed and subject to denial if we find undisclosed material information that would have changed the outcome of the policy issuance decision.

Yes, if you are applying for a policy that requires medical underwriting, you must disclose a positive COVID-19 diagnosis. Not doing so would be considered material misrepresentation and could result in your policy being voided.

As mentioned above, death claims made against an underwritten policy issued within the last two years are contestable, regardless of the cause of death. Additionally, you don’t have to die for a material misrepresentation to void your contract. The policy can be voided at any point within the first two years if AAFMAA finds that you provided incorrect information about your health history and that the correct information would have prevented us from issuing the policy.

If you were diagnosed with having contracted COVID-19 prior to applying for life insurance and you failed to disclose that diagnosis on your application, your death claim could be denied. This is because, if you had disclosed your COVID-19 diagnosis, we would have followed current industry guidelines and possibly postponed acceptance of your application. In this case, your policy would be voided and your survivors would only receive a refund of the premiums you had paid.

No, the COVID-19 vaccine is classified as a typical wellness check, for which we do not require disclosures and do not deny death claims. We strongly suggest that our Members follow CDC recommendations and receive the COVID-19 vaccination as soon as they are eligible.

Industry guidelines indicate that a COVID-19 diagnosis may postpone acceptance of your application for a period of three weeks to 1 year following recovery, depending on the severity of symptoms and treatment. This timeline is subject to change as new information becomes available and industry guidelines are adjusted accordingly. Those who experience a full recovery may be considered for issue before 12 months, while serious cases (such as those which required a ventilator) may be postponed for longer.

No. Receiving a COVID-19 vaccination will not affect the acceptance of your application.

No, AAFMAA cannot change your premiums or your health classification on a policy you currently hold. Your premiums and health classification will remain the same, even if you have been diagnosed with COVID-19 or you are at a higher risk of exposure due to your job, living situation, or recent travel, or if you get one of the COVID-19 vaccinations approved for emergency use by the USFDA.