Term vs. Permanent Life Insurance

What’s the difference between term and permanent life?

Like all life insurance policies, term insurance and permanent insurance were created to protect the financial well-being of your loved ones in case you pass away. What makes them different, however, comes down to a few basic factors: how long the coverage lasts, the features and benefits they offer, and how the premiums (your payments) are structured. Let’s take a look at how they compare.

How long does the protection last? 

Permanent life insurance: As the name suggests, permanent life policies (such as whole life) are designed to provide long-term—often lifelong—coverage. As long as you continue to pay your premiums, your coverage will be there for you whenever you need it.

Term life insurance: Conversely, term life policies provide temporary protection that lasts for a set period of time (the term). In many cases, the coverage can be renewed, but only up to a specific age, and your premiums will generally go up with each renewal.

What benefits do I get?

Permanent life insurance benefits:

These policies generally offer long-term death benefit protection and a host of potentially valuable features. In particular, most permanent life policies give you the opportunity to build cash value. This feature can be especially helpful later in life since the cash value you accumulate can be accessed to help pay for unexpected emergencies or milestone events like college and retirement.¹ 

定期寿险的好处:  

With term coverage, you get short-term death benefit protection (often 10, 15, or 20 years), and your beneficiaries will receive a lump-sum death benefit if you pass away during this time. While term life does not offer any cash value accumulation, some policies come with flexible features that allow you to use your benefits early if you become terminally ill² or will help pay your premiums if you become disabled.³

How much does the coverage cost?

Permanent life insurance costs: 

Since each type of permanent life insurance uses a different payment method, let’s focus on the most common, whole life. With whole life coverage, your premiums are locked in at the time of purchase and are guaranteed not to go up. As a result, whole life coverage may start out more expensive than term, but in the long run it may prove to be a better value. 

Term life insurance costs: 

With term coverage, your premiums are locked in for the period of coverage you select. If you choose to renew your coverage, the premiums will increase annually. That’s why it’s important to carefully consider your time frame and select the length of coverage that fits your needs and budget. 

How do I know which coverage is right for me? 

Choosing one type of coverage over another can be difficult—especially if this is your first time purchasing life insurance. Since everyone has a unique set of needs, we recommend working with a New York Life agent. That way, you can go over all the information together and make sure you come up with an educated decision. In the meantime, the following guide may prove helpful: