What is the difference between term and permanent insurance?

Term vs. Permanent Insurance

When exploring life insurance options, it’s important to understand the difference between term and permanent. Term insurance covers you for a shorter period and overall is a less expensive and simpler option. Permanent insurance gives you lifelong coverage and can provide support during your retirement. While the amount you receive as a death benefit can be similar for both, the key differences are outlined in this infographic.

Who is it for?

Term insurance: Young families, homeowners with a mortgage and small business owners.

Permanent insurance: Adults with long-term perspective, people who already make full use of RRSPs and TFSAs and wealthy people.

What is the initial cost?

Term insurance: Lower initial cost. 

Permanent insurance: Higher initial cost.

Does it cover death?

Term insurance: Temporary coverage for the financial impact of death

Permanent insurance: Life-long coverage for the financial impact of death.

What are the benefits?

Term insurance: Replaces lost income and covers debt. 

Permanent insurance: Tax-favourable investment vehicle for estate-planning purposes.

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