Term vs. Permanent Life Insurance

What is term insurance? Term insurance provides protection for a specific period of time. It pays a benefit only if you die during the term. Some term insurance policies can be renewed when you reach the end of the term -- which can be from one to 30 years. The premium rates increase at each renewal date. Many policies require that you present evidence of insurability at renewal to qualify for the lower rates.

What is permanent insurance? Permanent insurance provides lifelong protection. As long as you pay the premiums, the death benefit will be paid. These policies are designed and priced for you to keep over a long period of time. If you don't intend to keep the policy for the long term, this may be the wrong type of insurance for you.

What are the advantages and disadvantages of term and permanent insurance? The following points can help you determine which type of insurance best suites your needs.

Term Insurance

Advantages

• Initial premiums generally are lower than those for permanent insurance, allowing you to buy higher levels of coverage at a younger age when the need for protection often is greatest
• It's good for covering needs that will disappear in time, such as mortgages or car loans.

Disadvantages

• Premiums increase as you grow older.
• Coverage may terminate at the end of the term or become too expensive to continue.
• The policy generally doesn't offer cash value or paid-up insurance.