What Are the Differences Between Term and Permanent Life Insurance?

mom and dad playing with two kids just got term life insurance

In this Article

If you are in the market for life insurance, you are probably wondering what type of policy best fits your goals. We’re here to help you make the best decision, and today we’re looking at the differences between two popular life insurance options: term and permanent life insurance.

Term life insurance basics

Term life insurance is one of the most popular life insurance options for its affordability. If you need financial protection for a certain period, rather than for a lifetime, term life is a good fit. When you purchase term life insurance, you select a coverage term (usually somewhere from 10 to 30 years). If you are still alive at the end of the term, you part ways with the insurance company. If you pass away during the term (and you’ve been paying your premiums on time) your chosen beneficiary will receive the death benefit. Term life insurance is straightforward, and premiums are generally more affordable than other types of life insurance. 

Permanent life insurance basics

Permanent life insurance is lifelong insurance coverage for those who want more flexibility and a longer policy term (some insurance companies cover up to 121 years). One of the biggest benefits of permanent life insurance is the built-in flexibility of premiums – if you experience a temporary financial hardship, and you have been paying premiums on time and have a sufficient cash value in the policy, you may be able to use the cash value of the policy to pay your premiums to keep the policy active. This can be helpful if you experience a job loss or a large, unexpected change in your financial situation. Permanent life insurance covers your entire life, rather than a specific term. Your coverage doesn’t have an expiration date, which can provide more peace of mind over time. Even more, permanent life insurance policies offer tax-advantaged savings during the entire life of the policy.

Differences between term life and permanent life insurance
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The main difference between these two policies is the duration of coverage. When you purchase term life insurance, you are essentially “renting” coverage for a set amount of time. With permanent life insurance, you will have coverage for a much longer period. If you pay your premiums and keep the policy in force, your policy will last until the maturity date (this amount of time depends on the insurance company you choose). If you need a longer range of coverage to provide estate liquidity for taxes or leaving an inheritance for loved ones, permanent life insurance will likely be a better fit than term life.

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Since term life insurance only lasts for a certain period, it is one of the most affordable types of life insurance on the market. Permanent life insurance is generally a little more expensive than term life insurance due to the length of the policy term. If you aren’t sure which type of insurance best fits your needs, chat with us today – we are here to help you find the best insurance for your budget and lifestyle.

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Term life insurance doesn’t offer any flexibility – if you miss a premium payment, your coverage will end. Permanent life insurance is flexible when it comes to premium payments – if you are unable to make a payment, the cost of insurance will be drawn out of the cash value of your account. Alternatively, if you have a little extra cash one month, you can contribute an extra amount to the cash value account within your policy.
Return of premium feature

Some life insurance policies, including term and permanent, can include a return of premium rider, which allows you to receive a full or partial refund of the money you paid into the policy when it expires. There is an additional charge for this option, but many people opt for this feature because it ensures that they won’t walk away empty handed if the outlive their life insurance policy.

The bottom line

As with any type of life insurance coverage, your premiums are based on your age and health at the time you apply for coverage. This means that it’s always best to secure your policy as early as you can in life to ensure you lock in a low rate. If you are still having trouble deciding which policy is best for your needs, we can help! Fill out our online application for term life insurance today or get in touch with an insurance agent who can shop on your behalf to find you the best deal on a variety of products. We’re always here to help you get the coverage you need to protect what matters most.

Let’s Get Started

If you are ready to get coverage, our online application for term life insurance takes less than ten minutes.

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Calie Brummer
Head of Digital Communications
Calie Brummer is a staff writer and Head of Digital Communications at Quility Insurance with a focus on financial well-being and life insurance solutions.