Term vs. Permanent Life Insurance: Which Do You Need?

Term Life Insurance

Term insurance covers you for a specific period — usually 10, 20, or 30 years. If you die during the term, your beneficiaries receive the death benefit. If the term expires and you're still alive, coverage ends and you've 'used up' your premiums (like car insurance).

Term is very affordable. A healthy 40-year-old can get a $500,000 20-year term policy for $30-$50/month. It's ideal for temporary needs like protecting a mortgage, replacing income while kids are young, or covering a business loan.

Permanent Life Insurance

Permanent insurance (whole life, universal life, IUL) lasts your entire life and builds cash value. Premiums are higher — often 5-15x more than term for the same death benefit — but you're building an asset.

The cash value grows tax-deferred and can be accessed through tax-free policy loans. This makes permanent insurance a dual-purpose tool: protection AND tax-advantaged savings.

When to Choose Term

You need maximum coverage for the lowest cost. Your need is temporary (mortgage, child-rearing years). You're on a tight budget and need protection now. You're young and healthy and can convert to permanent later.

When to Choose Permanent (IUL)

You want lifelong coverage that never expires. You want to build tax-free cash value for retirement. You've maxed out your 401(k) and IRA and need additional tax-advantaged savings. You want to leave a guaranteed, tax-free legacy to your heirs.