Level Premiums

Your premium stays exactly the same for the entire term. A 30-year-old paying $30/month for a 20-year term will pay $30/month for all 240 months. This predictability makes budgeting easy.

Convertible to Permanent

Most term policies include a conversion option. Before your term expires, you can convert to permanent life insurance without a new medical exam—even if your health has changed.

Cash Value Component

A portion of your premium builds savings within the policy. This cash value grows tax-deferred and can be accessed through loans or withdrawals. However, withdrawals reduce the death benefit unless you pay the money back.

Lifetime Protection

Unlike term life, permanent insurance never expires. As long as you pay premiums, your beneficiary will eventually receive the death benefit—whether that’s in 10 years or 50 years.

✓ Advantages

• Extremely Affordable: $15-40/month for $500,000 coverage when you’re young and healthy—50-70% cheaper than permanent insurance.
• Simple and Transparent: You know exactly what you’re getting: death benefit coverage for X years at a fixed price. No hidden fees or complex policy mechanics.
• Easy to Understand: Term life is straightforward. If you die during the term, your family gets paid. No cash value complications or policy loans to manage.
• Perfect for Income Protection: Covers your earning years when dependents rely on your income. A 20-year term starting at 30 covers you until age 50 when kids are grown.
• Convertibility Option: Most policies let you convert to permanent life before the term ends without a new medical exam—valuable if your health declines.
• Fast Approval: Healthy young adults often get approved in 24-48 hours with no medical exam.
• Best Value Per Dollar: If you need $500,000 in coverage, term life gives you the most protection for the lowest monthly cost.

✗ Disadvantages

• Coverage Expires: When the term ends, you lose coverage unless you convert or buy a new policy. Rates will be higher if you reapply at an older age.
• No Cash Value: You build no savings or equity. Every dollar paid is pure protection—once the term expires, you get nothing back.
• Premiums Rise After Term: If you need coverage beyond the initial term, new term policies cost significantly more at age 50+ or with health changes.
• Not Permanent: If you live past the term end date and still have coverage needs, you’ll need to requalify and pay much higher rates.
• Conversion Can Be Expensive: While you can convert without a medical exam, permanent insurance rates at conversion can still be steep depending on your age and health.
• Doesn’t Build Wealth: Term insurance is pure protection, not an investment. If wealth-building is a goal, permanent insurance offers that component.

✓ Advantages

• Lifetime Coverage: As long as premiums are paid, you’re covered for life. No expiration date means no need to requalify or worry about losing protection.
• Guaranteed Death Benefit: Your beneficiary will eventually receive the full death benefit tax-free, whether in 10 years or 50 years.
• Cash Value Accumulation: A portion of premiums builds savings that grow tax-deferred. You can access this through loans or withdrawals.
• Flexibility: With universal life, you can adjust premiums and death benefits over time. Loans against cash value can supplement retirement income.
• Estate Planning Tool: Permanent insurance provides liquidity for estate taxes, funeral costs, and leaving an inheritance that won’t be eroded by market downturns.
• Uninsurable Later: If you lock in permanent coverage now while healthy, you’re protected if you develop serious health issues later.
• Tax-Deferred Growth: The cash value component grows without annual tax liability, making it an efficient wealth-building tool.

✗ Disadvantages

• Very High Cost: Premiums are 8-15 times higher than term life for the same death benefit. $30/month term could cost $200-400/month as permanent insurance.
• Cash Value Growth is Slow: Early years see most premiums going to commissions and fees, not the cash value account. Significant cash value takes years to accumulate.
• Complex and Hard to Understand: Multiple policy types, surrender charges, loan provisions, and interest calculations make permanent insurance confusing for most buyers.
• Not a Great Investment: Cash value returns often underperform the stock market. You’re paying a premium (literally) for insurance wrapped around a mediocre savings vehicle.
• Surrender Charges: If you cancel the policy early, surrender charges can eat up most or all of your cash value.
• Requires Higher Underwriting: Permanent insurance often requires more extensive underwriting and higher premiums if you have health issues.
• Overkill for Most People: If you only need coverage until kids are grown or debt is paid, paying for lifetime coverage is wasteful.
• Policy Risk: With universal life, if cash value dwindles and returns underperform, the policy can lapse and you lose coverage despite paying premiums.

Can I get both term and permanent insurance?

Direct answer: Yes. Many people buy term for income protection and permanent for estate planning or retirement income supplementation.

For example, a 35-year-old might buy a 20-year term policy for $300,000 and a permanent policy for $250,000. This provides affordable income protection during working years, plus permanent coverage for estate needs. The term can be converted to permanent before expiration if desired.

What happens to my term policy after it expires?

Direct answer: The policy terminates. You lose coverage unless you convert it to permanent insurance or buy a new policy.

If you convert before expiration, you don’t need a medical exam, and rates are based on your current age (not your health). If you wait until after expiration and want new coverage, you’ll need to requalify medically at higher rates. This is why buying term early and choosing a long enough term (to age 65+) is important—it locks in low rates for a longer period.

Is permanent life insurance a good investment?

Direct answer: Not typically. The cash value returns usually underperform the stock market, and investment fees are higher than traditional investments.

You’re paying premium prices for insurance bundled with a mediocre savings account. From a pure investment standpoint, buying term life and investing the savings difference in low-cost index funds usually produces better long-term wealth. However, permanent insurance can serve legitimate purposes like guaranteed lifetime coverage, estate liquidity, and pension maximization strategies for high-income retirees.

Can I lose my term coverage if I miss a payment?

Direct answer: Yes, but there’s usually a grace period of 30-60 days to catch up before coverage lapses.

If you miss a premium payment, insurers typically give you a grace period to pay without losing coverage. If you don’t pay within that window, coverage terminates. Once terminated, you’ll need to requalify with a new application if you want coverage restored. Setting up automatic payments prevents this problem entirely.

Should I buy term or permanent based on my age?

Direct answer: Most experts recommend term for anyone under 50 with temporary coverage needs, and permanent only if you specifically need lifetime coverage.

Your age affects rates, but doesn’t determine your choice. A 55-year-old might still be better served by a 10-year term if coverage is temporary, while a 35-year-old with permanent financial needs might benefit from permanent insurance. The coverage need drives the decision, not age alone. However, buying earlier is always smarter—rates are lower and you lock in protection while healthy.

What if my health changes after buying term life?

Direct answer: Your rate is locked in. If you become uninsurable, you can still keep your term policy by paying the original premium.

This is one of the biggest advantages of buying term life early. If you develop diabetes, cancer, or heart disease at age 40, your $30/month premium stays $30/month. You’re not dropped, and your rate doesn’t increase. If you want permanent coverage later, check your conversion option—you may be able to convert to permanent insurance without a new medical exam.