Should I Buy Term or Permanent Life Insurance?

Shawn Plummer

CEO, The Annuity Expert

Term insurance or permanent life insurance? Which life insurance should I buy? This guide will weigh your options to help you make a better decision.


Term Life Insurance vs. Permanent Life Insurance

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Term Insurance

With a term life insurance policy, you pay premiums for a set number of years called the term. If you die during that time, the insurance company pays the death benefit to your beneficiaries, the people you choose to receive it. If you don’t die during the term, you and the insurance company can part ways, or you may be able to renew the policy, but your premiums will increase a lot.

Term insurance usually provides the most considerable amount of insurance protection at the lowest initial cost. For this reason, it’s the type most people start with.

Because term policies end at a specific point—the end of the term —they are best for protecting large needs with specific endpoints. Typical periods you might choose term insurance to protect include the time:

  • remaining on your mortgage obligation.
  • you plan to continue to work and have others relying on your income.
  • remaining on an outstanding business or other loans.

Permanent Insurance

Permanent life insurance is different. There is no set term. It lasts your entire lifetime, as long as you continue to pay the premiums. It pays a death benefit if you die, and it has a cash value component that can grow over time.

Permanent insurance (whole life insurance) is designed to last as long as you live and typically makes a good supplement to term insurance. However, you will likely still want insurance after your term coverage ends, either for life-long or unplanned needs or needs with an unpredictable or extended end date. Good reasons to have permanent insurance include helping to take care of:

  • The costs associated with your death (often called “last expenses”) include funeral or memorial costs, outstanding medical bills, and estate taxes.
  • Someone who becomes or may still be dependent on you (either financially or for care, or both), such as children who are not yet independent or have special needs.
  • A once-temporary condition that you have extended— for example, a refinanced (and possibly extended) mortgage, a home equity loan, a delayed retirement date (meaning extended income-earning years), or a new business.
  •  Someone, such as a parent, who has developed a condition and who now requires your care.
  • Your grandchildren.
  • Your “second” family from a remarriage.

Why Build Cash Value in a Life Insurance Policy?

Because the cash value is a benefit for living, through tax-free loans and withdrawals, the cash value can help fund retirement, pay for college, and deal with unexpected emergencies.

Remember, to have enough cash value for a loan or withdrawal, you want to fund your policy properly.

Compare Term Life Insurance Quotes Vs. Permanent Life Insurance Quotes

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Shawn Plummer

CEO, The Annuity Expert

I’ve sold annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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