Taking care of your family is your primary goal, so you've decided to learn more about life insurance to help protect their financial future. But it doesn't take long to get lost in the lingo: short-term vs. long-term life insurance, permanent, universal, variable and more.
"Short-term" generally refers to term insurance, which provides affordable coverage for a specific period, like 10 to 30 years. There's also temporary life insurance, which covers a year or less. Meanwhile, "long-term" usually means permanent life insurance, which can cover you for the rest of your life.
Understanding the different types of life insurance
One of the primary factors in choosing life insurance is deciding how long you want the coverage to last. Here's what you need to know about your short-term vs. long-term life insurance options.
Temporary life insurance covers you for a year or less
Temporary life insurance is a form of short-term coverage. It usually provides you with life insurance for less than a year. It works just like other life insurance policies—if you pass away during the coverage period, your beneficiaries will receive a death benefit.
Key things to know about temporary life insurance:
- Provides extremely short-term coverage
- Tends to have very low-cost, fixed premiums
- May be able to renew yearly, but premiums may rise
- Offers no cash value option
Temporary life insurance is not very common, and not all insurance providers offer it. Some people choose this policy to bridge the gap between jobs that have a life insurance employment benefit, or if they know they need coverage only for a limited time.
Term life insurance covers you for a set period
Another form of coverage is
Key things to know about term life insurance:
- Provides coverage for both short and long lengths of time
- Has fixed premiums with varying costs
- May be renewable at the end of the term, but premiums may rise
- Offers no cash value option
Term insurance is generally less expensive than permanent coverage because it doesn't accrue a cash value—money you can access during your lifetime—and it can expire without paying out a benefit. Many people get a term policy in early to mid-adulthood to provide for their family or cover the cost of a mortgage if they were to pass away.
Permanent life insurance covers you for life
Key things to know about permanent life insurance:
- Can provide lifetime coverage
- May have fixed or flexible premiums
- Doesn't need to be renewed, so premiums won't increase
- May offer a cash value option with interest or investment-earnings growth
Permanent coverage can be more expensive than term, but it may fit your needs if you don't want to worry about your age, health or risk factors affecting your premium prices over the long term. You also have access to your cash value for any use while you're alive—whether to supplement your retirement needs or to cover a major purchase—making it a versatile financial planning tool.
Factors to consider when exploring life insurance
Selecting life insurance coverage is a personalized decision, and it may even change over time as your lifestyle and needs shift. When determining
- Your family and loved ones—who do you provide for and what are their needs?
- Your income—what would it take to replace what you earn?
- Your financial obligations—do you have debts your survivors would struggle to pay?
- Your age and health—how would these affect your premium rates?
- Your risk factors—do you have a lifestyle or hobbies that endanger your safety?
- Your legacy—do you want insurance to be a means of passing generational wealth?
Life insurance calculator
Choosing the best option for you and your family
Many factors go into choosing life insurance coverage, but supporting your loved ones and leaving a positive legacy stands out. Whether you're looking for temporary, term or permanent coverage, you have choices.
To help sort out your options, connect with a local