Life insurance basics

Term vs. permanent life insurance, explained simply

Many people tell us they’re covered. When we look closer, the coverage sometimes ends sooner than they expected. Here’s a plain-language way to understand the two main types.

Think of it as renting versus buying

Term life insurance is like renting. It covers you for a set period, often 10 or 20 years, and it usually costs less. It’s a good fit when you need strong protection during a specific stage, like raising children or paying off a mortgage.

Permanent life insurance is like buying. It’s designed to last your lifetime, and some permanent policies, such as whole life and indexed universal life, can build cash value over time.

Term can protect you through the years your family depends on your income. Permanent can add lasting coverage and a way to build value.

What happens when a term policy ends?

After 10 or 20 years of premiums, the policy simply ends if you’re still alive. At that point you generally have a few choices:

  • Let the coverage end, if you no longer need it.
  • Convert some or all of it to a permanent policy, if your policy allows it. This is often more expensive than the term policy was.
  • Apply for new coverage. This depends on your health and age at that time, so you may not qualify, or the price may be higher.

That last point is why it’s worth thinking about the end of your term before it arrives.

Why many families use both

Term is much less expensive, which makes it helpful when children are young and a family needs the most protection for the lowest cost. Permanent coverage can sit alongside it for needs that don’t expire. The right mix depends on your goals, budget and stage of life.

What about coverage through work?

Life insurance from an employer is a valuable benefit, and it’s worth having. But it often has limits:

  • It usually can’t go with you if you change jobs.
  • It’s often a multiple of your salary, which may not match what your family would actually need.

That’s why many people look at their own coverage in addition to what work provides.

Questions worth asking

  • How long will my family depend on my income?
  • Is my coverage tied to my job?
  • What happens when my term ends, and can I convert?
  • If a policy builds cash value, what are the costs and limits, and how do loans or withdrawals affect the death benefit?
  • Who owns the policy, who pays for it, and who is the beneficiary?

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This page is general educational information. It is not tax or legal advice, and it isn’t a recommendation for any specific product. Policy features, costs and availability vary by carrier and state. Policy loans and withdrawals can reduce the death benefit and cash value.