People always ask why should I buy Permanent life insurance when I can by Term for so cheap? There is no one answer to this question, but to understand the difference is important.

Term will last for a period of say 10, 15, or 20 years and the premium should remain level during that period. A term policy is basically just a rented death benefit for a period of time. If you die during that period, a beneficiary receives a tax free benefit for the face amount of the policy. At the end of the term, the term rate will dramatically increase if the customer wants to keep the policy. If the customer decides to drop the policy at that point, then they can convert it to a permanent policy, apply for a new term (if insurable), or just simply walk away.

Permanent life insurance lasts for the life of the client, as long as the client pays the premium. It is much more expensive initially compared to term, but the premium remains level for the life of the policy. The client locks into a mortality rate when they buy permanent, so it is better to buy permanent at the earliest age possible. To illustrate the difference: When the 20 year term reaches year 21 the price is going to be much higher than the premium of the person who is in year 21 of the permanent life insurance policy. Permanent, also accumulates cash value that you can borrow against throughout your life for college, cars, etc., while term does not build equity.

It is good to look at the pros and cons when buying something important like life insurance.