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Term vs. Permanent Life Insurance: Which One is Right for You?

Life insurance can be complex and overwhelming, especially with the countless insurance policies out there. It’s important to know the differences between them since each type has unique characteristics that may or may not be right for you. But more often than not, shopping for policies can get confusing. When it comes to life insurance policies, they can commonly be broken down into term vs permanent life insurance.

In honor of September being National Life Insurance Awareness Month, let’s dive into some of the main things to be aware of when deciding between term and permanent life insurance.

Term Life Insurance

As the name might suggest, term life insurance provides coverage for a specified amount of time – usually from 10 to 30 years, with 20 being the most common. Once the term period ends, your coverage ends. If you pass away before the term period ends, then your beneficiaries get the face value of your policy. It’s important you consider the length of the term carefully, and be sure it covers your dependents until they no longer need support. It can be very expensive — or impossible to renew term insurance later if your health situation changes.

Term insurance generally costs less than other – more permanent insurance – and carries a predetermined premium. You will want to compare rates and coverage to ensure you’re getting the best policy for your needs.

Permanent Life Insurance

Permanent life insurance provides lifelong protection for the insured. This type of policy usually comprises an insurance product coupled with a savings or investment component. Your insurance company invests part of your premium and your cash value is then built up by the accrued interest. The growth is generally tax deferred and can be accessed over the life of the policy, with some constraints.

These types of policies tend to have larger upfront costs with higher premiums due to the extended coverage period and investment component. Investment choices offered through the policy tend to be high cost and inefficient, which may offset the potential tax benefit. Permanent life insurance is generally not necessary for most people’s financial planning needs; however if you’re interested in estate tax mitigation, financial legacy enhancement, or have pre-existing health issues, permanent life insurance may make sense for you.

Personal Capital Strategy

We generally recommend that if you are in normal health, term life insurance is preferable to permanent life insurance. Your circumstances, however, are unique to your own life, and you should speak with your advisor to determine what kind of life insurance is right for you.

When you use our free tools to input your financial information, we can recommend a level of insurance coverage to help keep you and your family protected and on track for your long-term goals.

Read More: How Much Life Insurance Do You Need?

All insurance analysis and insight provided is extended to you as a courtesy for educational purposes only. You should not rely on this information as the primary basis of your insurance planning decisions. We are not licensed insurance professionals. You should consult a qualified licensed insurance professional regarding your specific situation.

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  1. sia online

    Hello Ripley Fitzgerald , I agree that is a great informative post about the update policies of life insurance for could help in the planning of strong financial future. I want an excellent life, and if life insurance can help them do that, But must check the services of different life insurance companies because some times these are different and also helpfull in the case of emergency to complete the medical expenses ,so my suggestion is you must use the services of life insurance after reading term and conditions of insurance company .

  2. Ridley Fitzgerald

    It’s great to learn more about life insurance. For me, it sounds like term coverage would be best, since it costs less. We want to be covered, in case of emergency, but we can’t spend a ton of extra money.

  3. Ashley Maxwell

    Thanks for mentioning how permanent life insurance is usually used when you have savings. I like how you said that the term option can cover you for the amount of time that you specify. My husband and I are considering looking into getting life insurance that would cover us for the time that we need.

  4. Steele Honda

    I believe that my brother needs to get a permanent life insurance as he might have some pre-existing health issues. He is now looking for a proper insurance but cannot find one as he has almost no experience in this market. I will make sure to advise him this option as it seems quite reasonable to me.

  5. Alex

    What do you think of permanent life insurance policies that are pitched as investment vehicles? They can make up a low return part of the bond/non-correlated portion of a portfolio. They also give an increasing death benefit and/or a decreasing premium over time. Are they a good deal?

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