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Term vs. Permanent Life Insurance

Life insurance helps you protect loved ones financially in case of your untimely passing. You pay premiums, and, in exchange, your insurer will pay your loved ones a death benefit payout if you pass away while your policy is in force.

Two common life insurance plans are term and permanent life policies. Although both offer your beneficiaries a death benefit, each policy differs in several ways. As a result, each can suit different types of policyholders. This article will explain how each policy works and discuss their differences in terms of premiums, coverage length, and wealth-building capabilities.

How term life insurance works

A term life insurance plan helps provide temporary coverage for a fixed period. Term lengths generally range from 10 to 30 years. If you pass away while the policy is active, the insurer pays your beneficiaries the death benefit. Keep in mind that the policy will expire if you outlive it. You’ll have to renew your policy if you still want coverage.1 Aflac offers term life insurance with various term lengths and death benefits to fit your needs.

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Types of term life insurance policies

Here are some types of term life insurance to choose from:2

Level term life insurance

Level term life insurance has a fixed death benefit and premiums for the policy’s duration. This makes level term life insurance the most predictable term life insurance type.

Decreasing term life insurance

Decreasing term life insurance offers a death benefit that decreases over time. Premiums also decrease over time. As a result, this policy may work well if your financial obligations shrink. For example, you may need less coverage if your children graduate college and begin working full-time.

Renewable term life insurance

Renewable term life insurance lets you start a new term life insurance policy at the end of your current term without a medical exam. This helps guarantee term life insurance coverage as you get older and avoid medical exams if you find them inconvenient. However, premiums will increase once you renew the policy.

Convertible term life insurance

Convertible term life insurance lets you turn your term life insurance policy into a permanent life insurance policy during or at the end of your plan’s term without a medical exam. Premiums will increase since you’ll be older and converting to a more expensive policy type. However, converting also lets you avoid the medical exam.

How permanent life insurance works

Permanent life insurance offers coverage for life if you continue to pay premiums. As a result, these policies are more expensive. Permanent life insurance also accumulates cash value with each premium payment. This cash value grows tax-deferred at a particular rate depending on the policy type. You can then borrow against or withdraw from it when it grows enough. Aflac offers a common type of permanent life insurance, whole life insurance, that can give you lifelong coverage that suits your needs.

Types of permanent life insurance policies

Here are some permanent life insurance policies you can choose from:

Whole life insurance

Whole life insurance offers a fixed death benefit and premiums for your entire life. Furthermore, the cash value grows at a fixed but guaranteed rate based on prevailing interest rates. These features make whole life insurance one of the most predictable permanent life insurance types.

Universal life insurance

Universal life insurance lets you adjust premiums and death benefits, offering increased flexibility. For example, you can lower your premiums by decreasing your death benefit or secure a larger death benefit by increasing your premiums. The cash value grows based on market rates. Additionally, universal life insurance generally costs less than whole life insurance.3 However, this can vary based on your circumstances and your insurer.

Final expense insurance

Final expense insurance is a permanent plan designed to cover funeral costs, burial expenses, and other end-of-life items. It has a small death benefit but offers low premiums and cash value. It also doesn’t require a medical exam.

Variable life insurance

Variable life insurance offers adjustable premiums and death benefits like universal life insurance. You can invest your cash value into individual securities, like stocks, bonds, and mutual funds. This offers you more investment choices, which can lead to faster potential growth. However, there is always a risk of losses. It’s smart to speak with a financial advisor before picking investments within your variable life insurance policy.

Differences between term and permanent life insurance

Here are some key differences between term and permanent life insurance:

Coverage length

Term life insurance is temporary, meaning it can expire before you pass away. Permanent life insurance lasts for life without changes in premiums as long you follow all terms and conditions and keep up on premiums. Some term life insurance policies may let you renew coverage or convert to a permanent life insurance policy. However, premiums will increase.


Term life insurance tends to charge lower premiums than permanent life insurance. A 20-year, $1 million term life policy costs an average of $480 per year for a healthy 30-year-old male. That same policyholder would pay an average of $2,536 per year for just $250,000 in whole life insurance coverage and $1,254 per year for $250,000 in universal life insurance coverage.4

Cash value

Permanent life insurance policies come with cash value, allowing you to build wealth over time that you can tap into by borrowing at favorable terms or withdrawing funds. If you surrender the plan, you can get the cash value minus surrender charges. Term life insurance does not come with cash value.

Which life insurance policy should I get?

Choosing between term and permanent life insurance depends on several factors:

  • How long you need coverage: If you need lifelong coverage, a permanent policy works better. However, a term policy may be best if you only need coverage for a specific timeframe.
  • Budget: Term life insurance is affordable and offers the most death benefit per dollar. But if you have a larger life insurance budget, permanent life insurance may be worth the investment.
  • Financial planning needs: Those who need additional wealth-building vehicles, such as people who have maxed out retirement accounts, may consider permanent life insurance. It offers loved ones financial protection and allows you to build cash value tax-deferred.

Aflac offers term and permanent life insurance

Term life insurance’s low premiums, limited coverage length, and lack of cash value make it a great option for prospective policyholders who need the most coverage for their dollar and don’t need more ways to build wealth. A permanent life insurance plan, on the other hand, can work well for people who want the peace of mind that lifelong coverage helps provide and seek additional avenues to build wealth. Plus, each policy has several types, making it easier for policyholders to find one that meets their preferences.

Aflac offers both term and whole life insurance policies. Speak with an agent today to help you find the right type of life insurance for your needs and budget.

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