Policy Types

How to Evaluate Term vs. Permanent Life Insurance

Term, or temporary life insurance, is often less expensive than permanent life* insurance. But other factors should weigh in your decision about which type of insurance to purchase.

Term Insurance vs. Permanent Life: What to Consider

If Term Life Insurance Rates Are Less Expensive, Why Should I Buy A Permanent Policy?

If you've been shopping for life insurance, chances are you have discovered that there is a price difference between term life insurance rates compared to the rates of a permanent/cash value life insurance policy. But as the saying goes, you get what you pay for.

Permanent life insurance policies come in many forms such as whole life and universal life. Just like a term life policy, their main purpose is to protect your loved ones against a sudden loss of financial support if you were to die unexpectedly. So if they both do the same thing, why should you dole out the extra money for a permanent/cash value life insurance policy?

First of all, unlike term life insurance (which provides coverage for a specific time period), a whole life or universal life insurance policy is permanent, and designed to provide coverage for your entire lifetime. However, there are many other benefits contained in a well-designed permanent life insurance policy that stretch beyond the death benefit protection they provide.

The fact is, while both types of policies pay out a death benefit, there are some considerations for choosing a permanent life insurance policy over term life. Here are three.

Permanent life insurance is designed to last you for life.

Some needs are permanent - such as final expenses, funeral/burial costs, estate liquidity, while others can be more temporary. Only permanent insurance is guaranteed to be there when you need it (assuming you pay the premiums). The primary reason why term life insurance rates are typically less, is that term is considered a temporary policy and at some point in time will become nonrenewable.

Permanent life insurance premiums are fixed for life, term life insurance rates are not.

While the premium for permanent life may be higher initially while you are young, it will never increase as long as there are no policy changes and premiums are paid on time. That's a huge benefit as you get older and not having to face the possibility of your term insurance premium increasing beyond your ability to pay (quite possibly at a time when you'll need your insurance the most).

Permanent life insurance has the potential to build cash value.

Permanent life insurance policies can earn guaranteed cash value in addition to the death benefit protection. This cash value can grow, and be used as the basis for a loan from the policy, used to pay premiums if necessary, or taken as a cash payment in the event you cancel the policy.  It's important to note that outstanding loans accrue interest and lower the policy death benefit while cancelling a policy may result in surrender charges.  Always discuss the implications of accessing your cash value with your carrier or agent before acting. 

For more information on the different types of life insurance available, visit the Protective Learning Center.


* As long as required premiums are timely made.

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective Life or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax‐related decisions. For information about Protective Life and its products and services, visit www.protective.com.

Companies and organizations linked from Learning Center articles have no affiliation with Protective Life or its subsidiaries.

Life Insurance Rates

If term life insurance rates are more expensive, why should you consider a permanent life insurance policy? This article looks at three reasons why term life insurance rates differ from a permanent life insurance policy, and why you get what you pay for. For more information, visit our learning center.

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