Term vs permanent life insurance
Neither is better. They solve different problems, and the objective decides.
| Term | Permanent | |
|---|---|---|
| Coverage duration | A set number of years | For life, if adequately funded |
| Initial cost per dollar of death benefit | Lower | Higher |
| Cash value | None | Yes, subject to charges and policy performance |
| Premium behavior | Level during the term, then sharply higher or coverage ends | Depends on design and funding |
| Complexity | Low | High, requires ongoing review |
| Common uses | Income replacement during working years, mortgage protection, temporary business needs | Estate liquidity, legacy objectives, buy sell funding, supplemental tax advantaged accumulation |
When term is usually the right answer
- The need has a defined end point, such as children reaching independence or a mortgage being paid.
- The priority is the largest death benefit for the lowest current premium.
- Budget is constrained and coverage adequacy matters more than features.
When permanent may be appropriate
- The need is permanent, such as estate liquidity or a lifelong dependent.
- There is a funding commitment that can be sustained for the long term.
- Other tax advantaged options have already been used and there is a specific accumulation objective.
- A business agreement requires coverage that will not expire.
Key takeaways
- Define the objective and its duration before comparing products.
- Term is often the honest answer, and coverage adequacy matters more than product type.
- Permanent coverage requires funding discipline and annual in force review.
Important disclosure
This content is general education, not legal, tax or investment advice, and not a recommendation of any specific product. Suitability depends on individual facts, product terms, issuing company strength and current law. Consult your own licensed legal and tax professionals before acting.
Last reviewed 2026-08-09 by Tim Parnell.
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