According to industry experts, most people don’t have enough life insurance. The American Council of Life Insurers reported that average coverage equals $197,000, which is equivalent to almost 3.5 years of income replacement (with the median income being $59,540 in 2024). That’s only half the recommended 7-year threshold.¹ ²
Furthermore, 38% of consumers said their households would face financial trouble within six months if a wage earner died today.³
When considering life insurance, one of the most important factors to understand is the difference between term and permanent insurance.
Term Life Insurance
- Provides coverage for a set period (10, 20, or 30 years).
- Pays a death benefit only if the policyholder dies during the term.
- No cash value accumulation.
- Lower cost, especially for younger buyers.
Permanent Life Insurance
- Remains in place as long as premiums are paid.
- Builds “cash value” over time, earning a modest return.
- Funds may be accessed but typically with limitations.
- Costs more than term coverage.
Which Should You Choose?
- Term insurance works well for covering upcoming expenses, like college costs.
- Permanent insurance may be more useful for long-term needs, like estate planning.
- Many people choose a combination: a permanent policy for long-term needs, supplemented by a term policy.
Note: Life insurance costs vary by age, health, and policy type. Policies include expenses, and surrendering early may trigger charges and tax consequences. Guarantees depend on the issuing company’s claims-paying ability.
Industry Trends
In 2023, people purchased more permanent life insurance policies than term policies. However, term insurance accounted for about 72% of the face amount issued.¹
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Disclaimer:
The content is developed from sources believed to be accurate. It is not intended as tax or legal advice and may not be used to avoid federal tax penalties. Please consult professionals for advice regarding your specific situation. This material was developed and produced by FMG Suite. FMG Suite is not affiliated with the named broker-dealer, state-, or SEC-registered advisory firm. Opinions expressed are for general information only and not a solicitation for the purchase or sale of any security.
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