What is a primary difference between temporary and permanent insurance?

The distinction between temporary and permanent insurance lies fundamentally in the duration of coverage. Temporary insurance, or term insurance, is designed to provide coverage for a specified term or period, such as 10, 20, or 30 years. Once this term ends, the policyholder may need to renew the coverage, but typically at higher premiums based on age and changes in health status. This type of insurance primarily focuses on providing a death benefit during the term when it is most relevant for needs like covering mortgages or education costs.

On the other hand, permanent insurance is designed to last for the entire lifetime of the insured, as long as the premiums are paid. This type of insurance not only provides a death benefit but also includes a cash value component that grows over time, which can be borrowed against or withdrawn in some circumstances. The lifelong duration of permanent insurance offers long-term financial protection, making it suitable for individuals who want coverage beyond a limited time frame.

Understanding this difference is crucial for clients when considering their insurance needs, as it helps them to choose the right type of policy based on their financial goals and the period they need coverage for.