25 Year Term Life Insurance vs IUL: Which Is Better in 2026?

Written by: Joshua Wahls, founder of Insurance By Heroes.

Reviewed by: Joshua Wahls, licensed insurance producer, NPN 19191959.

Last reviewed: May 6, 2026

Our process: We review life insurance content for accuracy, state availability, carrier fit, underwriting context, and consumer clarity. See our Editorial Policy, Licensing, and Advertising Disclosure.

At Insurance By Heroes, we were founded by a former first responder and military spouse. Our team comes from public service backgrounds, including military, law enforcement, fire, EMS, healthcare, and education. We serve everyone, not just fellow public servants—but that service-minded approach shapes how we help families find the right coverage.

We’re also independent agents, which means we don’t work for just one insurance company. We shop dozens of carriers to find the best fit and price for your specific situation. This comparison shopping is done for you—free of charge.

People often worry they’ll “lose money” if they outlive a term policy. But that’s like saying you wasted money on car insurance because you didn’t crash. You paid for protection. You received it. That’s exactly how insurance is supposed to work.

How an IUL Works

An indexed universal life policy is a permanent life insurance product. It covers you for your entire lifetime (as long as premiums are paid), and part of your premium goes into a cash value account. That cash value earns interest based on the performance of a stock market index, like the S&P 500.

Sounds appealing on paper. But IULs are complicated products with several moving pieces.

Your cash value growth is subject to caps and floors. The floor means you won’t lose money when the market drops (usually 0% minimum), but the cap means your gains are limited too, often around 8% to 12% depending on the contract. There are also cost of insurance charges, administrative fees, and surrender charges if you try to access your money early. These internal costs eat into your returns and can be difficult to track without reading the fine print carefully.

Monthly premiums for an IUL are significantly higher than term. For the same 40 year old looking at $500,000 in coverage, an IUL might cost $400 to $800 per month or more, depending on how the policy is funded. That’s roughly ten times the cost of a comparable term policy.

The Real Comparison

Here’s where it gets practical.

A 25 year term policy costs less and does one job well. It replaces your income, covers your mortgage, and protects your family during the years they depend on you most. It’s built for people with temporary financial obligations. Kids who need to get through college. A mortgage that needs 20 more years of payments. A spouse who needs income replacement during your working years.

An IUL tries to combine life insurance with a savings and investment vehicle. The idea is that your cash value grows over time and you can borrow against it in retirement or use it for other financial goals. But the reality is that IUL illustrations (those projections agents show you) often assume optimistic market returns. Actual performance can look very different after fees and caps are applied.

If you’re a disciplined investor, buying a 25 year term policy and investing the premium difference in a low cost index fund will almost always outperform an IUL over the same time period. This is the classic “buy term and invest the difference” strategy, and the math tends to favor it strongly.

That said, IULs can make sense for specific situations. High income earners who’ve maxed out every other tax advantaged account sometimes use them for additional tax deferred growth. People with permanent insurance needs, like estate planning or special needs trusts, might benefit from a permanent policy structure. But these are edge cases, not the norm.

When a 25 Year Term Makes More Sense

For most families, a 25 year term policy hits the sweet spot. It covers you through your peak earning years and your children’s dependence on your income. And the money you save on premiums (often $300 to $700 per month compared to an IUL) can go toward retirement accounts, college savings, paying down debt, or building an emergency fund.

Think about it this way. If you’re 35, a 25 year term protects your family until you’re 60. By then, your mortgage may be paid off, your kids are financially independent, and your retirement savings have had decades to grow. Your need for life insurance may have shrunk dramatically.

Many 25 year term policies also include a conversion option. This lets you convert part or all of your term policy to a permanent policy later without taking a new medical exam. So if your needs change and you decide you want permanent coverage, the door isn’t closed. You just have the flexibility to make that decision later, when you have more information about your actual financial situation.

Why Comparing Carriers Matters More Than You Think

Here’s something most people don’t realize about life insurance pricing. Two equally rated carriers can quote wildly different premiums for the exact same person. We’re talking 50% or more variation for identical coverage. One company might offer you preferred rates while another gives you standard. Same health, same age, same coverage amount. Completely different prices.

This is why working with an independent agency makes such a difference. A captive agent (the kind you find at the big name companies) can only sell you that one company’s products. If their underwriting doesn’t favor your profile, you’re stuck with a higher price or a decline. And that’s it. They can’t shop around for you.

Insurance By Heroes was founded by a former first responder and military spouse. Our team comes from public service backgrounds, including military, law enforcement, fire, EMS, healthcare, and education. We serve everyone. Our background shapes how we work (with integrity, a service first mindset, and genuine commitment to doing right by people), not who we work with. As an independent agency, we work with dozens of top rated carriers. That means we can compare quotes across the entire market to find the company that prices your specific situation most favorably. Whether you’re comparing 25 year term policies or weighing term against an IUL, getting quotes from multiple carriers is the single best way to find the lowest rate. And we handle the comparison shopping so you don’t have to.

Handling Common Concerns

Some people put off getting coverage because they assume they’ll be declined or that rates will be unaffordable. One decline from a single company doesn’t mean anything about your overall insurability. Different carriers have completely different underwriting guidelines. What gets you declined at one company might get you preferred rates at another. An independent agent who knows which carriers favor which health profiles can make all the difference.

Others figure they’ll wait until they’re healthier to apply. The problem with waiting is math. Every birthday increases your base premium. Health conditions can develop complications that worsen your rating class. And the rate you lock in today stays fixed for the entire term. Today’s health becomes tomorrow’s locked in price. Getting quotes now, even if you’re not sure you’ll buy immediately, gives you real numbers to work with instead of guesswork.

And if you’re relying on employer group life insurance as your primary coverage, keep in mind that most group plans only cover one to two times your salary with no portability. Leave the job, lose the coverage. And when you go to replace it, you’ll be older and potentially more expensive to insure.

What the Process Actually Looks Like

Getting a quote is simpler than most people expect. You fill out a short form with basic information, a real person (not a call center) reviews your situation, they shop carriers to find the best fit, and you get options with actual numbers. No obligation. No pressure. Just information you can use to make the right decision for your family.

Every carrier weighs health factors, age, and coverage amounts differently, which is why comparing quotes across multiple companies is so valuable.

Frequently Asked Questions

Is a 25 year term policy better than an IUL for most people? For the majority of families, yes. A 25 year term provides affordable, straightforward protection during the years your family depends on your income most. The significantly lower premiums free up money for retirement savings, college funds, and debt payoff. IULs serve a purpose for certain high net worth or estate planning situations, but they add complexity and cost that most families don’t need.

Can I switch from a term policy to permanent coverage later? Many term policies include a conversion option that lets you convert to a permanent policy without a new medical exam or health questions. This is a valuable feature because it gives you flexibility. You can lock in affordable term coverage now and convert later if your needs change, all without worrying about future health conditions affecting your eligibility.

What happens when my 25 year term expires? When the term ends, your coverage stops. Some policies allow renewal at significantly higher rates, but most people either no longer need the same level of coverage by that point or convert a portion before the term ends. The key is choosing a term length that aligns with when your major financial obligations (mortgage, children’s education, income replacement needs) will be resolved.

How much cheaper is a 25 year term compared to an IUL? The difference is substantial. For a healthy 40 year old, a 25 year term with $500,000 in coverage might cost $50 to $80 per month. A comparable IUL could run $400 to $800 or more per month. That’s a difference of $350 to $700 every month, or $4,200 to $8,400 per year, that could be invested elsewhere. The best way to know your actual rate is to get personalized quotes based on your specific health, age, and coverage needs.