Life insurance should be a key part of your financial plan as it provides security for your loved ones in the event of your death. That’s why it’s important to learn the basics of what kind of life insurance is right for you.

1. Overview

Term Life Insurance

• Coverage Length: Provides coverage for a specific period (e.g., 10, 20, or 30 years) and once the term expires, you’re no longer covered.
• Cost: Generally lower premiums compared to permanent life insurance.
• Payout: Pays a death benefit only if you pass away during the term of the policy.
• Renewal: Can be renewed, but premiums increase with age.

Permanent Life Insurance (includes universal life, variable life, and whole life)

• Coverage Length: Lifetime coverage for as long as premiums are paid.
• Cost: Higher premiums compared to term life insurance.
• Payout: Guaranteed death benefit, regardless of when you pass away.
• Cash Value: Builds cash value that can grow over time and be borrowed against.

2. Key Features Comparison

3. Pros and Cons

Term Life Insurance

Pros

• Affordable premiums.

In 2024, for a $500,000 20-year term life insurance policy, here are the average yearly premiums for healthy, nonsmoking women and men, respectively (according to NerdWallet):

• Age 20: $177 and $216
• Age 30: $186 and $221
• Age 40: $282 and $334
• Age 50: $641 and $817

• Simple and easy to understand.
• Ideal for covering temporary needs (e.g., mortgage, children’s education, etc.).

Cons

• No cash value or investment component.
• Coverage expires after the term. However, you can typically convert a term policy into a permanent policy up until a year before it expires if the policy has a conversion privilege.
• Renewal costs increase significantly as you age. If you get level term life insurance, the premium stays the same throughout the life of the policy.

Permanent Life Insurance

Pros

• Lifetime coverage.
• Builds cash value over time.
• Can serve as an investment tool or provide funds for emergencies.

  Cons

• Higher premiums.
• More complex with investment options and fees.
• May not be necessary if you only need short-term coverage.

4. Which is Right for You

• Term Life Insurance: Best if you need life insurance for a specific period (e.g., to cover debts, income for dependents, or a mortgage).
• Permanent Life Insurance: Ideal if you’re looking for lifelong coverage, want to build cash value, or need life insurance as part of estate planning and/or wealth transfer.

5. Final Tips

• Not everyone needs life insurance and evaluate your own personal financial situation to determine if you need life insurance. Consider your coverage needs, affordability, and whether you want to leave a financial legacy.
• It is in your best interest to get a life insurance policy as early as possible since premiums keep increasing as you age.
• Consult with a Financial Advisor. Life insurance is a significant decision, and a professional can help determine the best option for you based on your individual goals and how much coverage you need.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s website or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by BFSG), will be profitable or equal any historical performance level(s). Please see important disclosure information here.