Term Life vs Permanent Life Insurance: Which Is Right for You?

How term and permanent coverage differ, and the questions that usually decide which structure, or combination, fits your situation.

Life insurance can serve different purposes at different stages of your life. You may need substantial coverage while paying a mortgage and raising a family. Later, your priority may be leaving money for final expenses or providing a benefit to loved ones.

Understanding the difference between term and permanent life insurance can help you choose coverage that fits your needs and budget.

What is term life insurance?

Term life insurance covers you for a set period, such as 15, 20, 25 or 30 years. If you die while the policy is in force, it pays a benefit to your beneficiaries. If you outlive the term, the coverage ends, subject to any renewal or conversion options in your policy.

Term life does not build cash value. It generally costs less at the outset than permanent insurance with the same amount of coverage, making it a practical way to obtain a larger benefit when your financial responsibilities are greatest.

For example, term life can help cover a mortgage, replace income or support children until they are financially independent.

What is permanent life insurance?

Permanent life insurance is designed to provide longer-term coverage, provided the policy remains in force and its requirements are met. Whole life and universal life are two different types of permanent insurance.

One permanent option I offer is a universal life type plan that builds cash value. Under this plan, the cash value is available only if you surrender the policy. Surrendering it ends your life insurance coverage. The amount you receive may be less than the premiums you have paid, particularly in the early years.

What about whole life insurance?

I also offer a whole life plan for end-of-life and final expense needs. It is completely non-medical, with coverage available up to $80,000. This is a different option from the universal life type plan described above.

I'll explain how this whole life option works, and who it may suit, in a separate article.

Which option might fit your needs?

For many clients, term life is where I start the conversation. It often makes it possible to secure the amount of coverage a family needs at a price they can afford. A permanent plan may also have a place when there is a clear longer-term need.

You do not have to choose only one type. Many of my clients choose both: a larger term policy to cover their mortgage and income needs, and a smaller permanent policy for longer-term coverage.

The right decision comes back to how much coverage you need, how long you need it and what you can afford.

Get in touch and let's find the coverage that fits your life.