Term Insurance Vs Permanent Insurance

Choosing the right life insurance policy is essential to protect your family’s financial future. The two main types of this insurance are term life insurance and permanent life insurance, each serving different needs. 

Understanding the key differences between these options helps you select the right plan based on your budget, long-term goals, and financial security needs. Whether you want simple, temporary coverage or a lifelong safety net with added benefits, knowing these distinctions ensures you make an informed decision. 

This page explains the differences to help you choose the best life insurance for your requirements in the UAE.

What is Term Life Insurance?

Term life insurance is a simple and affordable way to get life cover for a set period. If you pass away during the term, your beneficiaries receive the payout. If you outlive the term, the coverage ends.

Consider term life insurance like renting —

• You use it for a limited time
• It's cheaper than permanent coverage
• You don’t build cash value
• It ends when the term expires

It’s ideal when -

• You want low-cost coverage to cover debts, daily expenses, and more
• You’re young and want to lock in at a low rate
• You're nearing retirement and need coverage to replace lost income

What is Permanent Life Insurance?

Permanent life insurance, as the name indicates, provides lifelong coverage, regardless of age, health, or how long you live. It can also assist with estate planning, such as covering costs related to transferring assets to your family. 

Premiums can be paid monthly or yearly (just like term insurance), but the coverage can continue even after payments stop. Buying a policy when you're younger and healthier makes it more affordable. 

If you cancel your policy before death, you’ll receive its cash value (after subtracting the management fees and other charges). This makes permanent life insurance a flexible option for long-term financial protection and planning.

Benefits of Permanent Life Insurance

Here are the key benefits of permanent life policies —

• Dividend Reinvestment: Dividends earned from your policy can be reinvested to increase the death benefit and the policy’s cash value over time.
• Using Cash Value: Depending on the lender's rules, you can use your policy as collateral for a loan. You can also access the cash value to supplement retirement income or cover costs if you face an illness.

Difference Between Term Life Insurance and Permanent Life Insurance

Find below the key differences between term life insurance and permanent life insurance —

How to Choose the Right Insurance Plan?

Both permanent and term life insurance provide a payout upon your death, but the former offers extra benefits that may justify the higher cost.

Here are some questions to help choose the right policy -

• Do you want coverage for your entire life?
• Are you worried about becoming uninsurable later?
• Is low-cost coverage more important than combining insurance and investment?
• Do you only need coverage for a set period, such as paying for your child’s education or covering a mortgage?