What's the Difference Between Term and Permanent Life Insurance?

retired couple drinking wine outside


Plan D

You shudder to think about dying. But imagine if you died suddenly—and left your family with no financial cushion?

"That's why life insurance should be at the top of your To Do list—but it isn't, because it makes you think about things you don't want to think about," says Jackie, 36, who has a 14-month-old daughter.

Jackie, a long-time DailyWorth reader, is determined to purchase life insurance policies for herself and her husband—and she is willing to share her experience with us.

Come to terms with it
Jackie, who works in sales for a food company, wanted to get started—but didn't know where to start.

We walked her through the two types of life insurance: term insurance (uncomplicated) and permanent insurance, also called whole life (complicated).

Term life insurance is similar to home insurance. You pay a monthly premium for coverage in case of catastrophe—fire, flood or in this case, death. If your house went up in flames, your policy would cover $X amount. If you died, your life insurance would pay your survivors $X amount (charmingly called the "death benefit").


  • The policy only lasts for a certain number of years, i.e. the term.
  • Like homeowner's insurance, you only get money if something bad happens. There's no cash value to the policy.


Permanent life insurance would cover you for your entire life. By and large these are cash-value policies that operate like complex savings or investment accounts, as this easy-to-read article from Money magazine explains here.

What Jackie found appealing about term is that it's straightforward—and inexpensive. According to Money: "A $1 million permanent policy for a healthy 40-year-old woman can run as much as $13,900 a year; she could get a $1 million 20-year term policy for $750 per year."

Next: Jackie discusses these options with her husband.