Term vs. Permanent Life Insurance: Which is better?
Compare term vs. permanent life insurance to see how each policy provides benefits and calculates monthly rates. Term life insurance rates are more affordable than permanent life insurance. Non-smokers can pay as low as $13/month for term life insurance and $85/month for whole life insurance. But your rates may vary. Shop around and compare multiple insurance companies to find the best term vs. permanent life insurance quotes.
Read moreFree Life Insurance Comparison
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
Kalyn Johnson
Insurance Claims Support & Sr. Adjuster
Kalyn grew up in an insurance family with a grandfather, aunt, and uncle leading successful careers as insurance agents. She soon found she has similar interests and followed in their footsteps. After spending about ten years working in the insurance industry as both an appraiser dispatcher and a senior property claims adjuster, she decided to combine her years of insurance experience with another...
Insurance Claims Support & Sr. Adjuster
UPDATED: Jan 8, 2024
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance provider and cannot guarantee quotes from any single provider. Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance related. We update our site regularly, and all content is reviewed by life insurance experts.
UPDATED: Jan 8, 2024
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance provider and cannot guarantee quotes from any single provider. Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
- Term life insurance lasts for a specific period
- Permanent life insurance doesn’t have an expiration date
- Whole life and universal life insurance are permanent life insurance policies
Do you want to compare term vs. permanent life insurance quotes? Term and permanent life insurance are available through insurance companies across the United States.
But which one is better? And what does term life insurance mean? Don’t worry, we’re here to help.
Our guide has everything you need to know about term vs. permanent life insurance, the cost of insurance through sample life insurance rates, and which companies provide the best life insurance policies.
Read on to learn all about term vs. permanent life insurance. If you’re ready to start comparing multiple quotes from various companies near you, enter your ZIP code in our free comparison tool above.
Is term life insurance better than permanent life insurance?
No, it isn’t. Life insurance policies aren’t necessarily better than one another. Life insurance needs vary for each person, so a term life insurance policy may be better for someone trying to save money.
However, a person with a flexible budget can invest in permanent life insurance to get more perks with a life insurance policy. Everything depends on what you want your life insurance policy to do.
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
What’s the difference between term life and permanent life insurance?
Term insurance lasts for a few years. For example, term life insurance is like renting life insurance for a specific number of years. The most common term lengths for term life insurance are between five-year and 30-year terms.
You’ll also receive a policy limit. Most term life insurance limits are from $10,000 to $1 million.
Some life insurance companies provide over $1 million in death benefits.
Before term life insurance expires, your life insurance company will give you an option to reapply for term life insurance.
Permanent life insurance doesn’t expire, and it lasts your entire life. You get the same benefits as term life insurance, and you’ll receive an account that accumulates cash over time.
Since permanent life insurance has more benefits, it’s more expensive than term life insurance. One-half of your permanent life insurance rate goes toward your life insurance, while the other half goes into the life insurance’s cash value.
What are the disadvantages of term life insurance?
Term life insurance may be cheaper, but it doesn’t have the investment opportunities like permanent life insurance. You’ll need to add life insurance riders to get additional benefits.
Life insurance riders are add-ons that supplement your insurance policy and expand coverage.
If you’ve invested a lot into a term life insurance policy, it may be a good idea to convert it to a permanent life insurance policy.
Term vs. Permanent Life Insurance Rates: Which is cheaper?
Several factors determine whether affordable term vs. permanent life insurance is available to you. Life insurance companies consider your age, gender, health, hobbies, occupation, policy length, death benefits, and policy type when calculating rates.
Another main factor in life insurance is whether you’re a smoker or non-smoker. Let’s look at the estimates for term life and permanent life insurance.
Average Monthly Term vs. Whole Life Insurance Rates
| Policyholder Age & Tobacco Use | Average Monthly Term Rates: Male | Average Monthly Term Rates: Female | Average Monthly Whole Rates: Male | Average Monthly Whole Rates: Female |
|---|---|---|---|---|
| 25-Year-Old Non-Smoker | $15 | $13 | $94 | $85 |
| 35-Year-Old Non-Smoker | $15 | $14 | $128 | $113 |
| 45-Year-Old Non-Smoker | $22 | $20 | $191 | $243 |
| 55-Year-Old Non-Smoker | $44 | $34 | $295 | $422 |
| 65-Year-Old Non-Smoker | $106 | $73 | $528 | $204 |
| Average Annual Rates for Non-Smokers | $40 | $186 | $247 | $204 |
| 25-Year-Old Smoker | $27 | $21 | $116 | $107 |
| 35-Year-Old Smoker | $30 | $24 | $157 | $146 |
| 45-Year-Old Smoker | $53 | $41 | $224 | $206 |
| 55-Year-Old Smoker | $114 | $83 | $350 | $321 |
| 65-Year-Old Smoker | $270 | $186 | $600 | $204 |
| Average Annual Rates for Smokers | $99 | $71 | $289 | $253 |
For this example, we used term life vs. whole life insurance rates (a type of permanent life insurance policy). Term life insurance is more affordable. Meanwhile, whole life insurance has more expensive life insurance rates per month.
Why are life insurance companies increasing monthly rates?
As you get older, life insurance rates increase. Life insurance companies also look at statistics of aging. According to the Centers for Disease Control (CDC), a person’s life expectancy decreases as they age.
Suppose a person has a critical or chronic illness, the risk of life insurance claim increases. Therefore, life insurance companies issue higher rates to offset the risk.
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
What are the best life insurance companies for a term and permanent life insurance policy?
Before you buy term vs. permanent life insurance, you should shop around for the best coverage. If you’re not sure where to look, start with the top life insurance companies in the United States.
Check out the table below to see the top 10 life insurance companies in America.
Top 10 Life Insurance Companies By Direct Premiums Written in 2020
| Ranks | Companies | Direct Premiums Written | Market Shares |
|---|---|---|---|
| 1st | MetLife Inc. | $103,335,055 | 13% |
| 2nd | Equitable Holdings | $62,688,657 | 8% |
| 3rd | Prudential Financial Inc. | $61,913,976 | 8% |
| 4th | New York Life Insurance Group | $40,211,642 | 5% |
| 5th | Massachusetts Mutual Life Insurance Co. | $38,461,197 | 5% |
| 6th | Principal Financial Group Inc. | $26,439,671 | 3% |
| 7th | Lincoln National Corp. | $25,385,450 | 3% |
| 8th | Western & Southern Financial Group | $22,920,717 | 3% |
| 9th | Transamerica | $22,875,109 | 3% |
| 10th | American International Group (AIG) | $22,620,803 | 3% |
These are the best companies by market share and direct premiums. The market share shows the portion of the life insurance industry a company controls, and direct premiums are how much each company earns from its customers.
Which life insurance companies have the best ratings?
Another thing you should consider is a life insurance company’s ratings. Some of the most reliable ratings come from A.M. Best.
A.M. Best is a rating agency that monitors insurance companies’ financial strength, credit, and customer satisfaction.
So which life insurance companies have the best A.M. Best ratings? We’ve researched that data for you and found the results.
Top Five Life Insurance Companies By Market Share and Their A.M. Best Ratings
| Company | Market Share | A.M. Best Rating |
|---|---|---|
| Northwestern Mutual | 8.2% | A++ |
| Lincoln National | 5.8% | A+ |
| New York Life | 5.7% | A++ |
| MassMutual | 4.8% | A++ |
| Prudential | 4.5% | A+ |
Although these companies don’t have the largest market share, they have superior ratings over their competitors. The A++ and A+ ratings mean that each company manages money well and promptly pays out claims. It also means that each company meets obligations to customers.
Term vs. Permanent Life Insurance: The Bottom Line
Term life insurance is only for a specific time. The higher your term length, the more you’ll pay for life insurance. Permanent life insurance is more expensive, but it won’t expire.
Also, permanent life insurance provides more benefits, such as a cash account. Some permanent life insurance policies even use your cash value to invest in the stock market.
If you want to save money and get the best insurance policy, compare term vs. permanent life insurance to secure the cheapest rates. Use our free comparison tool below to compare multiple insurance companies in your area.
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
Case Studies: Term vs. Permanent Life Insurance
Case Study 1: John’s Term Life Insurance
John, a 35-year-old non-smoker, wanted to secure life insurance to protect his family financially in case of an unfortunate event. After comparing various options, he chose a 20-year term life insurance policy with a death benefit of $500,000.
The monthly premium for his term life insurance was $30, providing him with the necessary coverage during the critical years when his children were growing up and his mortgage was still active. John appreciated the affordability and simplicity of the term life policy, which perfectly met his current financial needs.
Case Study 2: Sarah’s Permanent Life Insurance
Sarah, a 40-year-old woman, wanted life insurance that would remain in force throughout her lifetime and could offer additional benefits besides death coverage. She decided to invest in a whole life insurance policy.
Sarah selected a policy with a death benefit of $250,000 and was delighted to discover that it accumulated cash value over time. The policy also offered the option to earn dividends based on the company’s financial performance.
Although the monthly premium was higher at $150, Sarah valued the long-term security and potential for growth that came with her permanent life insurance.
Case Study 3: Michael’s Conversion to Permanent Life Insurance
Michael, a 45-year-old professional, had been holding a term life insurance policy for the past 15 years. As he approached the end of the term, he realized that his insurance needs had changed, and he wanted to secure a policy that would not expire.
Michael converted his existing term life insurance policy into a permanent life insurance policy with a death benefit of $750,000. The new policy allowed him to continue coverage without needing to reapply or undergo medical examinations.
While the premium increased to $120 per month, Michael felt confident that he made a wise decision to ensure financial protection for his family indefinitely.
Frequently Asked Questions
Can I cancel my life insurance policy if I no longer need it?
Yes, you can generally cancel a life insurance policy, but specific provisions and implications may apply. Consult with your insurance provider or a financial advisor before making a decision.
Can I have both term and permanent life insurance policies at the same time?
Yes, it is possible to have multiple life insurance policies simultaneously to address different coverage needs.
Can I borrow money against the cash value in my permanent life insurance policy?
Yes, permanent life insurance policies with cash value allow borrowing through policy loans or withdrawals, subject to terms and conditions.
What happens if I outlive my term life insurance policy?
If you outlive your term policy, coverage expires. Some companies may offer renewal or conversion options, but it’s important to plan ahead for long-term insurance needs.
Are the sample life insurance rates mentioned in the article accurate for everyone?
The sample rates provided are averages and estimates. Individual rates may vary based on factors like health, lifestyle, and underwriting guidelines of insurance companies.
Can I switch from term life insurance to permanent life insurance?
Yes, it is generally possible to convert a term life insurance policy to permanent life insurance, but specific conversion terms and costs vary between insurance companies.
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
Kalyn Johnson
Insurance Claims Support & Sr. Adjuster
Kalyn grew up in an insurance family with a grandfather, aunt, and uncle leading successful careers as insurance agents. She soon found she has similar interests and followed in their footsteps. After spending about ten years working in the insurance industry as both an appraiser dispatcher and a senior property claims adjuster, she decided to combine her years of insurance experience with another...
Insurance Claims Support & Sr. Adjuster
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance related. We update our site regularly, and all content is reviewed by life insurance experts.