What is the Difference Between Permanent Life and Term Life Insurance?

By David B. Cary

May 1, 2024

Insurance agent in a suit and tie discussing life insurance options with a married couple at desk.

A simple answer to this question that I have often given my clients is to look at permanent life insurance as a solution to permanent needs and term life insurance as a response to temporary needs.

Examples of permanent needs include end-of-life expenses, emergency funds, income replacement and legacy and special-needs planning. Temporary needs may include paying off debts, such as home and auto loans, school loans and credit cards.

Term life products, which provide coverage for a fixed time, can be set for a period of years and reduced as your debts are reduced or paid off; they can also be converted to a permanent option for an increased premium. Permanent life premiums can be paid up in a short time or to age 100. A permanent policy builds cash value over time that can be accessed while it is in force through a policy loan or full or partial withdrawal/ surrender (taking cash value out of a policy will reduce the future death benefit).

So how should you decide between permanent life and term? That depends — as your life changes, so do your needs. A young family on a tight budget with a mortgage and student loans has different priorities than an older, more established couple planning for college tuition and retirement. It is best to discuss your specific goals with an agent. This is a benefit of membership for every Knight of Columbus. Whether you opt for term, permanent or a blended solution, unique needs deserve personalized attention.

Visit kofc.org/familyfinance for additional educational resources.

David B. Cary is currently a field performance specialist with the Knights of Columbus; he previously worked as a K of C field agent and general agent for more than a decade.