Updated on: August 11, 2022

What are the differences between term and permanent life insurance?

There are two main types of life insurance: term life insurance and permanent life insurance. Term life insurance offers coverage for a specific amount of time, whereas permanent life insurance offers lifelong coverage that never expires. Here’s a look at how they work:  

Term life insurance

  • Covers you for a set amount of time (e.g. 10, 15, 20, 30 years).
  • You can choose the time length and you can renew your policy when it expires. But your premiums (monthly or annual fees) may increase after you renew. 
  • Some term policies will let you convert to permanent life insurance.

Permanent life insurance

  • Covers you for your entire life. 
  • In most cases, your premiums are guaranteed to stay the same throughout your life. 
  • Your policy will never expire, so you don’t have to worry about renewing it. 
  • Some permanent policies even come with a savings component called cash value. 

Within each of these two insurance categories, there are various types of policies. The type of policy you select will depend on your specific needs and goals. 

"When you're buying life insurance, you've got to think long term," says Mark Coutts, a CFP, CHS, CFDS, RPA, FCSI and president of Coutts Financial Services Inc. in Toronto. “So, you're looking farther down the road when deciding whether term insurance is always going to be right for you, whether permanent insurance is the right choice, or whether it's a combination of the two."

Let’s explore the features of each type of life insurance. Here’s what you can expect from life insurance today and decades from now.

Who needs term life insurance? 

Term life insurance can be a great choice for people who want affordable, short-term coverage. It’s ideal for young families, homeowners with a mortgage and business owners. 

As an example, let’s say you bought a 30-year term policy because you wanted your family to have financial protection for a few decades. If you died during this 30-year period, your family would receive a death benefit. The death benefit is the tax-free payment that your beneficiaries receive after you die.  They can then use the money from the death benefit for any reason, such as paying off debts, mortgage/rent, the cost of child care, etc. 

If you’re alive and well when the 30-year term policy ends, then you can reassess your options. By this time, your mortgage or other debts may be paid off and your kids may be all grown up. So, you may decide you don’t need a life insurance policy. Or, you may still need coverage – in which case, you can renew your policy or convert to a permanent policy. The option to renew a policy may not apply to all term policies. Talk to an advisor for more detailed information. 

Sun Life offers term life insurance products with coverage from $50,000 to $25,000,000. 

Who needs permanent life insurance?

Permanent life insurance is a great choice for people who are looking for lifelong coverage. It’s also helpful for those who want to have cash value within a life insurance policy. Cash value can grow over time and you can always borrow or withdraw money from it. It’s important to note that withdrawing from your cash value may reduce the amount of money in your policy’s death benefit.  Cash value may be available depending on the type of policy you choose.

Permanent policies are more expensive than term policies. Why? Because unlike a term policy, a permanent policy won’t expire. And, depending on the type of policy you choose, your premiums won’t increase as you age.  

There are 3 types of permanent life insurance plans you can choose from: 

Whole life insurance is a standard permanent policy that includes a death benefit for your beneficiaries. Some whole life policies also give you the chance to grow cash value.

Sun Life offers whole life insurance products with coverage up to $25,000,000.

Universal life insurance offers lifelong protection with a range of investment account options. Your beneficiaries will get a death benefit after you die. And, any payments you make above the cost of insurance can potentially grow on a tax-preferred basis. This means that you won’t have to pay taxes on growth within your policy, as long as it doesn’t exceed a certain limit. 

Sun Life offers universal life products with coverage up to $25,000,000.

Participating life insurance offers financial protection for your beneficiaries, who’ll get a death benefit after you die. But while you’re alive and well, it also gives you the chance to earn more through potential dividends. With participating life insurance, you may receive policyholder dividends as determined by Sun Life’s Board of Directors. But please note that dividends are not guaranteed. Connect with an advisor for more detailed information. You can use those dividends to reduce your premiums or get more coverage. Or, you can choose to receive  them as cash.

Sun Life offers participating life insurance products with coverage up to $25,000,000.

Term vs. permanent life insurance: What are the advantages?

Term life insurance

  • It's initially inexpensive, if you're young.
  • You can buy lots of coverage.
  • It's easy to understand.


Permanent life insurance

  • Lifetime coverage continues even if your health fails.
  • The cost is guaranteed to never go up. (*This applies to most types of permanent life insurance.)
  • Later in life, it's less costly than term insurance.
  • It can provide tax-preferred cash value growth opportunities.
  • You can withdraw or borrow from the cash value.

Term vs. permanent life insurance: What are the disadvantages?

Term life insurance

  • Coverage is temporary; the protection ends when the term ends (if you don't renew).
  • The cost goes up if you renew when the term ends.

Permanent life insurance

  • It's more expensive than term insurance.

Term vs. permanent life insurance: What trends should you consider before you buy?  

Term life insurance

  • Rising mortgage and consumer debt. You could still be in debt after your term ends.
  • Adult children are financially dependent on parents longer than ever. So your kids may still need your financial support even after your term policy expires. 

Permanent life insurance

  • Life expectancy has increased over the years, which makes this an increasingly attractive option because coverage is lifelong, not temporary.

Term vs. permanent life insurance: What’s the application process like?

Term life insurance

  • You’ll have to answer some medical questions. 
  • You’ll have to go through underwriting
  • You can get a quote and apply online for coverage from $50,000 up to $1,000,000. 
  • You can get a quote and apply through an advisor for coverage from $50,000 up to $25,000,000. 

Permanent life insurance

Get term or permanent life insurance

Talk to an advisor to buy life insurance

Need help figuring out what’s right for you? Talk to a Sun Life advisor. Our advisors look carefully at your specific needs to help you figure out what type of insurance is right for you. To find an advisor near you, enter your postal code.

Buy life insurance online 

  1. Get an online quote.

  2. Choose your coverage and apply.

  3. Get coverage without delay.

1 Only two of our term life insurance products can be purchased online: Sun Life Go Simplified Term Life Insurance and Sun Life Go Term Life Insurance.

1 Only one of our permanent life insurance products can be purchased online: Sun Life Go Guaranteed Life Insurance.