Life choices: more consumers buy whole life policies, but those who opt for term life are buying policies with higher coverage amounts. (Life/Health).

The debate over which is better--whole life or term life--has new twists in the 21st century, but the purpose of the policy is still the deciding factor. While term insurance provides more coverage for less premium, whole life plans, including all types of permanent insurance, provide consumers with opportunities they can't get in term coverage, according to company representatives.

The Internet is driving part of the discussion, turning term insurance into a commodity driven by price, said Tom Beresford, vice president of product management for Prudential Financial Inc. A company that isn't in the top quartile of term products by price isn't getting the listings on the Web that other companies are seeing, Beresford said. As a result, those companies are seeing less term business than competitors, he said.

Term insurance is growing more popular as consumers use the low cost to bulk up on coverage, said Jack Dolan, associate director of media relations for the American Council of Life Insurers. But whole life is the type of policy people hold on to, he said.

Whole life policies -- which include all types of permanent insurance, such as traditional whole life, universal life and variable life -- accounted for 52% of total sales of life insurance, by number of policies, in 2000, according to a study done by ACLI. The Life Insurers Fact Book, produced by ACLI each year, lists term insurance--including both level and decreasing term, and term additions to whole life policies--as having a higher percentage of the total face amount, 57% compared with 42% for whole life, the study said.

Of the number of policies that remained in force after 10 years, 78% were whole life and 22% were term policies, the study said. But when looking at face amount in force, 58% of the total was whole life while 42% was term, much closer to equal numbers, according to the study.

While there is a lot of talk about "buy term and invest the difference," many customers still seem to be buying whole life, said Dolan.

People need three things to start a discussion about financial security--expert guidance, a financial plan and products that satisfy their needs, said Richard Hall, senior vice president of life insurance for Northwestern Mutual Life Insurance Co.

If fact-finding determines that a consumer needs $1 million of coverage but can't afford that much in permanent policies, while still needing permanent coverage for estate planning or tax needs, then the best way is to mix products, he said.

In the economic boom years, people were interested in how high a return they could get on their money and how much money they were going to make, so they went to alternate financial products, such as mutual funds, Hall said. Now, people are more interested in their own financial security and having an insurance foundation on which to build, he said.

Recently, consumers are focusing on their families' financial situations in more detail as they look toward retirement, said D. Richard Williams, co-chief executive officer and chief operating officer of Primerica Inc., which specializes in term insurance sales. In Primerica's view, consumers see the idea of buying term insurance as a better deal from an economic standpoint.

CNA Life shares this view, said Bob Miller, vice president of life marketing for CNA Life. Consumers often are concerned that they're buying life insurance for the right reason and aren't buying it for the cash value, Miller said. With the number of companies having such similar premium rates, agents are selling multiple policies to the same customer and delivering the policy that comes in first, said Miller. To guard against overinsurance, Northwestern puts an amendment on the policy where the applicant agrees to take only one policy, Miller said. But even with multiple policies being issued, most people are underinsured, he said.

For Northwestern Mutual, of the policies that ended in a death claim over the past four years, 3% were term and 97% were whole life, Hall said.

Prudential also sees term insurance as an important part of the overall strategy, in part because many people who buy term ultimately convert it to permanent protection, Beresford said. About 20% to 25% of Prudential's permanent premium comes from term conversions each year, he said.

For CNA Life, the term conversions aren't happening, Miller said. CNA has an independent agent marketing force, and the agents CNA works with are primary with another company, he said. When a client is ready to convert, the agent will probably sell for the primary company, unless the customer's health has changed, in which case the CNA policy is converted, Miller said.

But people really don't need to convert many of the policies sold with CNA, he said, noting that the company sells a 20-year term plan up to age 65, which takes consumers up to and past most life expectancies. And CNA writes 30-year term up to age 49, which also limits the need for conversion, Miller said. People are buying and holding term, keeping it in force, he said. If there are no major underwriting changes, there is little pressure to convert, Miller said.

The industry has to get people back to understanding they still have a need for insurance, he urged. For example, the No. 2 reason students drop out of college is death of a parent and lack of continued funding--a reason CNA sells quite a bit of five-year term to people with seniors in high school, to cover the college years, Miller said, "Sept. 11 taught us that bad things happen to good people, that people need to think about their financial planning and talk to a professional," he said." And with term premium rates as low as they are these days, there is no reason for anyone to die underinsured."

Life Insurance in Force in the United States, 2000

Number of policies in thousands, dollar amounts in millions.

            Number of  % of Total                % of Total
Type         Policies    Policies  Face Amount  Face Amount

Individual
 Permanent    125,397        77.1   $5,441,179         58.0
 Term          35,660        21.9    3,917,272         41.8
 Endowment      1,493         0.9       17,920          0.2

Group
 Permanent      8,048         5.1     $451,628          7.1
 Term         148,226        94.9    5,924,498         92.9

Note: Data represent direct business. Individual and group categories
include credit life insurance on loans of more than 10 years' duration.

Source: American Council of Life Insurers