Life Insurance: Term vs. Permanent — What Makes Sense Today?

Life insurance is one of the most important tools for protecting your family’s financial future. But when it’s time to select the right coverage, many people get stuck deciding between term insurance and permanent insurance. Both serve a purpose, but they work differently—and understanding those differences can help you choose what fits your needs today.

Whether you’re planning for young children, protecting income, or thinking about legacy planning, the right type of life insurance should align with your stage of life, your long-term goals, and your budget.

What Term Life Insurance Is

Term insurance provides protection for a specific period—typically 10, 15, 20, or 30 years. If the insured passes away during that time, the policy pays a death benefit to the beneficiary. After the term ends, coverage ends unless renewed or converted.

Term life is often the best option for people who need affordable coverage during high-responsibility years, such as raising children, paying a mortgage, or replacing income during working years. It’s simple, cost-effective, and designed to cover temporary financial risks.

What Permanent Life Insurance Is

Permanent life insurance provides coverage for your entire lifetime as long as the premiums are paid. It also includes a cash value component, which grows over time and can be accessed, borrowed against, or used later for estate or tax-related planning.

Permanent insurance comes in several forms—whole life, universal life, and indexed universal life. While significantly more expensive than term insurance, it can make sense if you want lifelong coverage, need to plan for estate liquidity, or have long-term wealth-transfer goals.

When Term Insurance Makes More Sense

For most households, especially during working years, term life insurance is the most practical and cost-efficient solution. It provides a substantial amount of coverage for significantly less cost than permanent insurance. Term works well when the primary goal is income protection, debt payoff, or ensuring family stability during earning years.

When Permanent Insurance May Be Appropriate

Permanent coverage is less about income replacement and more about long-term planning. It may be appropriate if you have a complex financial situation, want to guarantee a legacy, or have an estate that may face tax obligations. Permanent life insurance can also play a role in business succession planning, charitable giving strategies, or providing funding for long-term care needs.

Cost, Flexibility, and Timing

A meaningful distinction between the two is cost. Permanent life insurance can be five to fifteen times more expensive than term insurance for the same death benefit. For many people, the higher premium simply isn’t necessary—especially when the bulk of their financial risk decreases over time as retirement savings grow and debt declines.

Some people use a hybrid approach: purchase a large term policy today and consider adding a small amount of permanent coverage later when cash flow and goals shift.

The Bottom Line

There isn’t a universal answer—both types of life insurance have a role depending on your financial stage and priorities. For most families, term insurance provides the right level of protection at a reasonable cost. Permanent insurance can make sense, but typically only when there’s a specific estate, business, or advanced planning reason to use it.

The best approach is to evaluate what you’re protecting, for how long, and at what cost—and then choose the policy that supports your long-term financial confidence.

By James Blue, Fee-Only Advisor | Blue Advisors

James Blue is the founder of Blue Advisors, a fee-only financial planning and investment management firm based in Columbus, Ohio.

This content is provided for informational and educational purposes only and should not be construed as personalized investment, tax, or legal advice. The views expressed are those of the author as of the date published and are subject to change without notice. Blue Advisors is a fee-only registered investment advisory firm. Advisory services are offered only pursuant to a written advisory agreement and to clients in the State of Ohio, the Commonwealth of Pennsylvania, and other jurisdictions where Blue Advisors is properly registered or exempt from registration. Past performance is not indicative of future results. Readers should consult with their financial advisor, tax professional, or attorney before making financial decisions.