Many people are often confused as to the difference between term life insurance and permanent life insurance. Whenever you are out there trying to find the best possible insurance you will almost always need to make a choice between permanent life insurance and term life insurance. The truth is that the difference between both these types of insurance policies pretty simple. The only complication you may face could be caused by adding additional features to your policy.

Term Life Insurance

The word term refers to a certain period of time for which the policy is valid for. This primarily means that a term life insurance policy can be valid for 20, 30, or even 40 years yet it will still be temporary. Now because of the fact that a term life insurance policy is for a given term the chances of someone surviving the policy is great and this is why these types of policies tend to be cheaper than permanent life insurance policies. The low price is also the reason why many people purchase these policies since they get more coverage at lower premium prices.

However once the term is over the policy is terminated and there also isn’t any cash value associated with it either. There are a few term policies that have various options that can be added by the purchaser to make the policy more flexible. For instance a ROP or return of premium option will refund all your premium payments if you survive past the policy’s expiration date. Adding this option can make the policy slightly more expensive but it also means that your policy will have some cash value after its expiration.

Permanent Life Insurance

Unlike term life insurance that has a definite expiration date a permanent life insurance lasts for as long as a person lives. This means that you continue to pay your premiums till the day you die. These policies tend to grow in cash value and because they don’t expire you can expect to pay an expensive premium for these types of policies. While many people use these types of policies for fundraising purposes, they do also have a protective nature.

One of the biggest advantages of permanent life insurance is that you are covered for your entire live. These policies are great for people who want to make sure that their family gets an amount they can live comfortably with. People also use permanent life insurance as a tax advantaged method of transferring their estate.