Term vs permanent life insurance: how to choose (and why conversion options matter)

• Age & health: Younger/healthier applicants pay less and can qualify for longer level terms or permanent guarantees.
• Coverage period: Longer guarantees (e.g., 30-year term or lifetime) cost more than short periods.
• Riders & options: Living benefits, waiver of premium, and chronic illness riders add value and cost.

• Best when: You need large coverage for income replacement, mortgage protection, or child-raising years.
• Pros: Lowest cost per $ of protection; simple; easy to ladder (multiple terms ending at different ages).
• Cons: Coverage ends or becomes expensive at the end of the term; no cash value component.

• Best when: You want lifetime coverage (final expenses, estate/legacy goals, special-needs planning, business continuity).
• Pros: Cash value accumulation potential; policy loans/withdrawals (rules apply); options for lifetime guarantees.
• Cons: Higher premiums; requires funding discipline; surrender charges and policy mechanics to understand.

Product names, guarantees, crediting methods, and loan/withdrawal rules vary by carrier and state.

• Choose mostly term if budget is tight, your largest financial obligations sunset (mortgage, college), and you mainly need income replacement.
• Choose mostly permanent if you want coverage that doesn’t expire, value potential cash value, or plan for legacy/estate liquidity.
• Blend if you need large coverage now and want a permanent base: buy a small permanent policy plus additional term.

• Health lock-in: You keep your original health class for the portion you convert (rules vary), which can be crucial if health changes.
• Time window: Conversions are allowed within a defined period (e.g., first 10 years or up to a certain age).
• Partial conversions: Convert only what you need now (e.g., 100k of a 500k term) and keep the rest as term.
• Eligible products: You convert to specific permanent options on the carrier’s conversion menu.

• Term + small permanent base: A modest permanent policy (e.g., 50k–150k) plus term for big obligations.
• Laddered term: Multiple terms ending as needs drop (e.g., 10/20/30-year layers).
• Convert later: Start with all term; convert portions to permanent as income rises or needs become permanent.
• Term rider on permanent: Some permanent policies let you add a term rider to boost death benefit efficiently and convert the rider later.

• Step 1: Calculate the needed death benefit (income replacement years, debts, education, final expenses).
• Step 2: If full need fits the budget as permanent, consider a permanent foundation.
• Step 3: If not, buy enough term to fully protect the family now, with a policy that offers good conversion terms.
• Step 4: Add or convert to permanent as income grows, needs persist, or estate/legacy goals solidify.

• Guarantee strength: Whole Life vs. Guaranteed UL vs. Indexed/Current-assumption UL—each handles guarantees and crediting differently.
• Funding discipline: Underfunding can undermine longevity; overfunding has limits (MEC rules).
• Costs & surrender periods: Understand charges, loan rates, and how long you’d need to hold the policy.
• Riders: Chronic/critical illness, term riders, waiver of premium—align with your needs.

Availability, guarantees, and tax treatment depend on product, carrier, and jurisdiction. Consult a qualified professional for specifics.

Can I start with term and switch later?
Often, yes. Many term policies offer conversion privileges within a set window, sometimes without new medical exams.

Does permanent always build cash value?
Most permanent designs include a cash value component, but growth, guarantees, and access rules differ by product.

Is a policy loan taxable?
Policy loans are typically not taxable when the policy stays in force, but tax outcomes depend on structure and status (e.g., MEC). Get tax advice for your situation.