Permanent Life Insurance vs Term Life Insurance: Which Is Right for You?

02.02.2026 | Category: Life Insurance

Underwritten by United of Omaha Life Insurance Company
Reviewed by: Andrew Berger, Mutual of Omaha VP and Actuary

Estimated read time: ~8 mintues

Summary: Selecting the right life insurance policy can be challenging, particularly when you’re uncertain about the different policies’ functions and characteristics. In some cases, people discover their policy doesn’t meet their financial goals, family requirements or budget. This guide will cover the key differences between permanent and term life insurance, along with cost comparisons and which option could be most appropriate for you.

In this article:

What is permanent life insurance?
What is term life insurance?
Key differences between permanent and term life insurance
Which is more expensive: permanent or term life insurance?
How to choose between permanent and term life insurance
Real-world scenarios: permanent vs term life insurance

What is permanent life insurance?

Permanent life insurance, as the name suggests, covers the insured person for their entire lifetime. As long as you pay your monthly premiums, your beneficiaries get a payout after your death.

It also has a cash value component, a savings-like account that grows over the term of your policy and is tax-free for as long as the policy is in effect.

Types of permanent life insurance include whole life insurance, where premiums stay the same for the life of the policy, and universal life insurance, where you can change key features like the death benefits or premiums within certain limits.

Permanent life insurance is sometimes called cash value life insurance because it offers both insurance protection and a cash value that can be used as an investment. It costs more than term life, but it’s also potentially more versatile.

Pros vs. cons of permanent life insurance

There are benefits of permanent life insurance and disadvantages of permanent life insurance, depending on your priorities and financial goals.

Pros of permanent life insurance:

Lifelong coverage guarantees a death benefit for beneficiaries
Builds cash value that grows tax-deferred
Can be used as a financial tool for supplementing retirement income or emergencies
Flexible options for premiums and death benefits within limits

Cons of permanent life insurance:

Higher premiums than term life insurance
May require long-term commitment to receive the full benefits

Permanent life insurance may be your best choice if you want protection that lasts a lifetime. Policies like this offer long-term life insurance coverage for your family or heirs while also building cash value that can be used for retirement or emergencies. Keep in mind using the cash value may reduce the death benefit.

What is term life insurance?

Term life insurance covers you for a set period, often between 10 and 30 years. If you pass away during that term, your beneficiaries receive the payout. Once the specific term ends, the policy expires unless you renew it or convert it to a permanent policy.

Key features of term life policies include:

Fixed term: Coverage for a set number of years.
Lower initial cost: Premiums tend to be more affordable because there isn’t a cash value component.
No cash value: Focused purely on protection for the amount of years you need it rather than building assets.

It’s fairly simple and affordable, which works well for people who want coverage during years when they have high expenses, such as paying a mortgage or caring for children.

Pros vs. cons of term life insurance

Term life insurance is straightforward but comes with limitations.

Pros of term life insurance:

Lower, more affordable premiums
Simple policy structure that is easy to understand
Useful for offering protection for short-term financial needs, like when your children are young

Cons of term life insurance:

Coverage ends after the term, leaving you unprotected if not renewed at considerably higher rates
No cash value accumulation

Term life insurance is more relevant if you only need temporary coverage. Often the most affordable life insurance option, a term life insurance policy works well for covering obligations like a mortgage, tuition or other short-term needs upon your death.

Key differences between permanent and term life insurance

Both policies offer valuable protection, but they serve different needs.

Features	Permanent Life Insurance	Term life Insurance
Coverage Duration	Lifetime	Fixed term (Typically 10-30 years)
Cash Value	Builds over time	None
Premiums	Higher than term; may be level of flexible depending on type	Typically lower and level for the term
Flexibility	Flexible options for premiuns and death benefits depending on type	Not flexible

Which is more expensive: permanent or term life insurance?

The cost of permanent life insurance is generally higher than that of term life insurance because of the lifetime coverage and because it accumulates cash value.

Term life insurance is often less expensive because it only covers a set period and doesn’t build up cash value. For people who are only looking for coverage for a specific length of time or want lower premiums, term life insurance may make the most sense.

Permanent life insurance: It costs more, builds cash value, which you can later access. Over time, permanent life insurance can become a financial tool.

Term life insurance: It costs less, but it has no cash value. Renewals after the term ends are typically very expensive. A new term policy may be purchased, but only if you still qualify and typically at higher rates as you get older.

How to choose between permanent and term life insurance

Deciding between permanent and term life insurance comes down to goals, family and budget. Here are some things to consider before you decide:

What are your financial goals?: Are you looking for temporary protection or lifelong coverage?
Consider your family: How long will you need to provide for loved ones?
Evaluate your budget: Can you afford higher premiums for permanent coverage, or is a lower-cost term policy more realistic for your budget?
How much flexibility do you need? Do you want potential options to adjust premiums or benefits later?
Calculate your coverage: Try a life insurance calculator to help you determine how much coverage is ideal, based on your needs.
Consult a professional: They can help you weigh options and compare policies side by side.

Real-world scenarios: permanent vs term life insurance

Here are scenarios that can help you better understand how to choose between permanent and term life policies.

Family-focused protection: A couple with young children opts for term life insurance to cover mortgage and education costs in the event of a parent’s death. Coverage may end when children become more financially independent, balancing protection with affordability.
Long-term financial planning: A single professional chooses permanent life insurance for lifelong coverage and cash value growth, useful for emergencies, college tuition or to supplement retirement income.
Combination approach: Some individuals combine term and permanent policies, using term for large obligations and permanent for lifelong protection.

Discover your options

Ready to see how different life insurance options could work for you? Spending the time to look into insurance coverage now can give you clarity and confidence about protecting the people and things that matter most in your life.

When you’re ready to take the next step, Mutual of Omaha can help you learn about a life insurance option tailored to you and your unique needs.

Make sure you get the right level of coverage

You can determine your life insurance needs with our final expense calculator.

Frequently asked questions (FAQs)

Can you convert term life insurance to permanent life insurance?

Many insurance companies offer the flexibility to convert term to permanent coverage. This conversion usually doesn’t require a medical exam, which can be advantageous if your health changes. Converting to permanent life insurance coverage allows you to maintain lifelong protection and begin accumulating cash value. However, be prepared for potentially higher premiums.

For some policies the option may be limited to a certain number of years and the company may limit which permanent products are eligible for conversion.

Some term policies do not offer this option at all.

Is permanent life insurance worth the extra cost?

Permanent life insurance can be worth the additional cost if you need lifelong coverage and value the cash accumulation feature. For many, the higher premiums are justified by the dual benefits of a death benefit for beneficiaries and a cash component that can serve as a financial resource during their lifetime. Consider your long-term financial goals to help determine if permanent life insurance is the right choice for you.

What is better for family protection, permanent or term?

The best option for family protection depends on your specific circumstances, such as your financial obligations and goals. Term life insurance is often sufficient to cover temporary needs like paying off a mortgage or funding college tuition in the event of your death. In contrast, permanent life insurance provides ongoing protection and a cash value that can be useful over time, making it suitable for those seeking comprehensive, long-term security.

Reviewed by: Andrew Berger, Mutual of Omaha VP and Actuary

Andrew Berger brings extensive leadership experience in the life insurance industry, with a primary focus on product development and innovation. He earned his bachelor’s degree from Bentley University. He is a Fellow of the Society of Actuaries and a member of the American Academy of Actuaries.

Disclosures:

Life insurance and annuities are underwritten by United of Omaha Life Insurance Company, Mutual of Omaha Plaza, Omaha, NE 68175. United of Omaha is licensed nationwide except in New York and does not solicit business in New York. In New York, Companion Life Insurance Company, Melville, NY 11747 underwrites life insurance and annuities. Each company is responsible for its own financial and contractual obligations. Products and services may not be available in all states. Policy form ICC18L198P or state equivalent. In FL, D787LFL19P, In NY, 1002Y-0119.

Mutual of Omaha Investor Services, Inc. and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation.

Consult with a professional tax and/or legal advisor before taking any action that may have tax or legal consequences.

Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc. a Registered Broker/ Dealer. Member FINRA/SIPC. Investment advisor representatives offer advisory services through Mutual of Omaha Investor Services, Inc., a SEC Registered Investment Advisory Firm.

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