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Term vs. permanent life insurance

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When it comes to buying life insurance, it’s important to know your options. You’ll want to understand how long your insurance will last, how much it will cost and what it will cover.

You have two basic choices with life insurance: term and permanent. Both options will help protect you and your family but have different features.

With term life insurance, you’re covered for the length of time that you choose. The cost is lower than permanent life insurance to start but typically increases when you renew it because the cost of insurance increases as you age.

On the other hand, permanent life insurance (also known as whole life insurance) costs more but helps give you security and often has additional features. It lasts a lifetime and the cash value may grow over time, with tax advantages.

 

Term life insurance

Permanent life insurance

How long does it last?

You buy term life insurance for a set length of time. When your term ends, in most cases your coverage can renew automatically, or you can convert to permanent insurance without answering more health questions.

As long as your premiums are paid, you have guaranteed lifetime insurance protection. Your coverage might be affected if you change your policy or make a withdrawal.

Cost

Initially lower than permanent life insurance but typically goes up each time your policy renews.

It can be more because you’re paying for lifetime coverage, but you have more options to increase your death benefit. Footnote 1

Benefits

The person (or people) you choose receives tax-free money when you die. They can use it however they want – for example, to help pay down debt, take care of the mortgage or send their kids to school.

  • The person (or people) you choose receives tax-free money when you die and can use it however they want.
  • It can build cash value over time. You have guaranteed access to these funds while you’re alive and can use them however you want. Footnote 2
  • You can withdraw money from your policy, although the payout when you die will be less. Footnote 2
Learn more about term life insurance

Learn more about permanent life insurance

Footnote 1
1 Any additional payouts are subject to tax limits.
Footnote 2
2 If you borrow against or withdraw from your policy, it may reduce how much money the person (or people) you’ve designated will receive (called a death benefit). You may also have to pay taxes on all or part of the amount withdrawn from or borrowed against your policy.

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