Term vs. Permanent Life Insurance: What Business Owners Need to Know

 Fun is like life insurance; the older you get, the more it costs.

- Kin Hubbard

As a business owner, protecting your company and securing your financial future is essential—especially when planning for your exit. But when it comes to life insurance, there’s often confusion about the difference between Term Life Insurance and Permanent Life Insurance and how they fit into a successful succession strategy. Let’s clear up the misconceptions.

Term Life Insurance: A Temporary Safety Net

Think of Term Life Insurance like renting a home. As long as you make payments, you’re covered, but once the term ends, the cost of renewing can rise significantly. This type of insurance is a cost-effective way to protect your business for a set period—typically 10 to 20 years.

For business owners, Term Life Insurance can be useful for:
✔ Covering business loans to ensure debts aren’t left behind
✔ Funding a buy-sell agreement to protect partnerships
✔ Providing temporary coverage while you grow your company

Permanent Life Insurance: A Long-Term Asset

On the other hand, Permanent Life Insurance is like owning a home with a mortgage—you’re building equity over time. Unlike Term Insurance, Permanent Life Insurance lasts a lifetime and accumulates cash value, which can be a strategic financial tool for business owners.

Here’s how it can support your business and exit plan:
✔ Funding a partner buyout in a succession plan
✔ Providing financial security for your family or key employees
✔ Accessing built-up equity to finance business opportunities or supplement retirement income

Which One is Right for You?

The best choice depends on your business structure, long-term goals, and exit strategy. Some owners start with Term and later convert to Permanent as their needs evolve.

If you’re unsure which type of insurance fits your business, contact me—I’d be happy to help you navigate your options.