The Difference Between Term Life Insurance and Permanent Life Insurance

Understanding how term life insurance and permanent life insurance differ is essential for making a well-informed choice. Both types of policies offer unique benefits and cater to different financial needs and goals.

Term Life Insurance

Term life insurance offers coverage for a specific period, known as the term. When you purchase this type of policy, you select the length of the term, which typically ranges from 10 to 30 years. When you agree to the policy, you will pay monthly or annual premiums. During the term, if you pass away, your beneficiaries may receive the death benefit, which is the amount specified in the policy. This payout can help cover expenses like funeral costs, debts or living expenses for your family.  

If you outlive the term, you can choose to renew the policy, convert it to a permanent policy (if the insurer allows it) or let it lapse. Term life insurance is often a more affordable type of policy because it only provides coverage for a limited time and does not include a cash value component.

Permanent Life Insurance

Permanent life insurance offers coverage for as long as the premiums are paid. One feature that sets permanent life insurance apart from term life insurance is the cash value component, which can increase in value over time and be borrowed against or withdrawn when necessary. This makes it a more flexible financial tool by offering a death benefit and a savings component.

Permanent life insurance typically has more expensive premiums due to its coverage and cash value benefits. It is suitable for individuals looking for lifelong protection and those who want to build cash value that can be used for various financial needs.

Choosing the Right Policy

Choosing a life insurance policy can be influenced by individual circumstances and financial goals. Term life insurance is typically recommended for those seeking affordable, temporary coverage, while permanent life insurance is better suited for those looking for lifelong protection and a savings component.

Learn More

Contact Eric Dodge Insurance Agency today to discuss your life insurance options.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.