Term vs. Permanent Life Insurance: What’s the Difference and Which One to Get?

When comparing term vs. permanent life insurance, the main differences are coverage duration, cash value and premiums.

Traditionally, term life insurance is more affordable, but the premiums may increase at renewal. Permanent life insurance has higher initial costs but stays level for the policy's duration.

While most people prefer term-life insurance, some situations may call for permanent life insurance, such as parents taking care of a lifelong dependent or seniors looking to use the cash value component as supplementary income.

If you need short-term coverage, a term life insurance policy may be better than permanent life insurance. You'll need to choose a term length that fits your needs and decide whether to renew the policy after it expires. Term life insurance is more affordable initially, but premiums may increase after renewal.

Permanent life insurance is costlier but offers lifetime coverage and doesn't require renewal. Policyholders make standard payments for the policy's duration. Unlike term life insurance, permanent coverage has a cash value component.

Although both term life and permanent life insurance policies secure the financial future of your loved ones should you die unexpectedly, these two policy types differ significantly.

A term vs. permanent life insurance comparison shows that term life policies are ideal if you need affordable short-term coverage. Permanent life insurance is better if you need long-term coverage with cash-value benefits.

Choosing the right life insurance involves weighing the pros and cons of term and permanent life insurance. Here's a comparison to help you decide which suits your financial goals:

The average cost of permanent life insurance can be up to 20 times higher than term life insurance. MoneyGeek compared life insurance rates across various demographics, considering factors like age, location and coverage amount. Review the infographic below to see how monthly premiums for term and permanent life insurance policies stack up across these variables.

While permanent life insurance offers extended coverage and a cash value component, term life insurance is often more appealing due to its lower cost and potentially higher benefits despite offering only short-term protection. Parents may opt for term life insurance to financially protect their children until they become independent, making permanent life insurance unnecessary for many.

When deciding between term life insurance vs. permanent life insurance, the best option depends on your financial health and goals.

Term life insurance policies are ideal for spouses or parents who want to secure their children's education or cover mortgage payments in the event of their untimely death.

Permanent life insurance may suit individuals seeking lifetime coverage and interested in retirement savings. Policyholders can build the savings component by making higher payments. They can later invest, withdraw or borrow against the cash value.

Choosing between term life vs permanent life insurance depends on your financial strategy and life circumstances. Term life offers affordability and fixed coverage periods, while permanent life provides lifelong protection and financial flexibility. Assess your needs to find the right option for you and your family.

Age plays a crucial role in evaluating permanent life insurance vs. term life insurance. Understanding how these policies work at different life stages is essential for seniors planning their financial future and legacy.

Term life insurance provides more coverage for each premium dollar, but rates typically increase with age and at each renewal. In contrast, permanent life insurance offers stability without renewal requirements. While many appreciate the cash value component, it often remains with the insurer upon the policyholder's death.

Use the table below to compare the benefits of different life insurance policies for seniors.

Term life insurance is often more beneficial than permanent life insurance, even without a cash value component, as most people can invest additional funds in other savings vehicles. Permanent life insurance may be suitable in specific situations but typically costs much more.

Here's why term life insurance may be more advantageous than permanent coverage:

Determining the right amount of life insurance involves assessing your personal and financial circumstances. Consider your financial responsibilities, including debts, living expenses and future obligations like education costs or retirement support for your spouse. Securing coverage 10 to 15 times your annual income is generally recommended, though this can vary based on your needs.

Deciding on term or permanent life insurance also impacts your coverage decision. Permanent life insurance provides a death benefit and builds cash value, often requiring a larger coverage amount due to its long-term benefits. In contrast, term life insurance may be more suitable for those with specific financial commitments over a shorter timeframe.

Understand the differences between term life and permanent life insurance to find the coverage that meets your financial goals and protects your loved ones.

Choosing between term and permanent life insurance policies depends on your needs. Here are answers to some common questions to help you understand the difference between the two.