Permanent vs. Term Life Insurance: What Are the Differences?

Kreg Bale
Kreg Bale March 27, 2022
Updated 2022/03/27 at 12:29 PM
Permanent vs. Term Life Insurance: What Are the Differences?

They say that there are only two things certain in life. Death and taxes.

While you would be hard-pressed to find someone in objection to that, it is quite shocking how many of us look the other way when it comes to the inevitable. In fact, one study shows that only 54% of Americans have life insurance, meaning that many families will be thrust into financial instability should the worst happen.

So if you are interested in shoring up the future of your loved ones, what are your options?

Permanent vs. term life insurance are the two terms that you will no doubt see when doing any investigation on the subject. Find out more about them here.

What Is Permanent Life Insurance?

Permanent life insurance covers someone’s whole life until they die. As long you pay your premiums, it is able to add a layer of security and peace of mind.

Permanent life insurance usually comes with an additional benefit, known as cash value. This means is that in addition to your insurance policy, you are essentially given a savings account that you can use should you wish to during your lifetime. How much money you can take out and the terms of which will depend on your policy, but it could come in very handy for you at some point in the future.

There are 3 main types of permanent life insurance.

Whole life insurance is the easiest type to understand, as it does exactly what it says. As long as all premiums are paid, your loved ones will get a set return when you die. It is typically the most expensive.

Universal life insurance again has set premiums for the entire term. However, it is slightly less robust in coverage, for example, many have a small cash value component or may not have one at all.

Variable life insurance is the last of the big three. It is when the policy cash value amount can go up or go down based on the performance of the cash value investments.

What Is Term Life Insurance?

The biggest difference between permanent vs. term life insurance is that term is only in effect for a certain period. If you were to die during this “term” then your loved ones would receive a guaranteed payout, known as a death benefit. You select this at the time you take out your policy along with the time period you wish your term to cover.

There are two main reasons that term life insurance is appealing. The first is cost. These policies are typically much cheaper than permanent ones. More information on the prices can be found on

The other benefit comes down to the reason you take out the policy. For many, the only reason most start to consider life insurance is due to the added responsibility of having a family. Term insurance is perfect for those that are happy to be covered only when their family would feel the financial pinch the most, when children are young and still dependent.

Permanent vs. Term Life Insurance: Which Is Right for Me?

So the question arises. Permanent vs. term life insurance, what should I choose?

The answer lies in your finances and motives. Permanent life insurance is great for peace of mind but you typically have to pay for that privilege. Having children who will need long-term care into adulthood is another reason for considering the permanent option.

Yet if you don’t mind missing out on the addition of a cash value benefit and want insurance for when your family will need it the most, a term life insurance may be for you.

Ready for Anything

The inevitability of death means that never preparing for it isn’t the wisest course. So we hope our breakdown of the differences between permanent vs. term life insurance has served to keep you clued up on your options.

If you are looking for more financial advice then check out the other great content on our site!


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