What’s the Difference Between Term and Permanent Life Insurance?

Affordable term life insurance is considered to be one of the most cost-effective plans because it only covers you for a finite period. If you purchase this kind of coverage when you are still young and healthy, you are more likely to lock in a good rate. Policies are available for periods of 10, 15, 20, 25, or 30 years. When your term ends, so does your coverage. There is no payout unless you die. It’s that simple.



Term life insurance is ideal for people who want to protect their dependents during a specific period of time during which they would experience the greatest financial devastation if you were to die prematurely.



Here’s an example: A parent purchases a 25-year term life insurance policy when their child is born. In this case, the policy would end when the child is 25 years old – an age when he or she is likely to be more or less financially independent. This way, if the parent were to die when the child is still young, he or she would receive a payout that would replace the parent’s income.



An affordable term life insurance policy becomes less affordable if you choose to renew or extend it at the end of your term. Since you are older and presumably less healthy, your insurance provider may increase your premiums.

Permanent life insurance provides you with lifelong coverage. Basically, your coverage ends when you die, at which time your beneficiaries will receive the payout.



This type of life insurance comes with higher premiums, but the premiums remain the same for the duration of your life. You will lock in a price that will never go up as long as you continue your payments. A permanent life insurance policy also accumulates cash value over time.



When it comes to selecting a life insurance policy, it is best to consider a few things – your lifestyle, your current assets, your dependents, and your retirement plans. Still not sure which type of policy to choose? Contact Bankers Fidelity for more information today.