Term Life Insurance covers a predetermined period of time, typically between 10 and 30 years. Term policies may be renewed after they expire, however premiums are recalculated based on the policy's value, and policy holder's age, gender, and health. Term policies do not have a savings component. There are some term policies that offer cash back at the end of the term, however these policies are typically just as expensive as a permanent life insurance policy.

Permanent Life Insurance covers the entire life of the holder and includes a savings component, where the cash value of the contract accumulates for the holder. The holder is then able to withdraw or borrow against the savings portion of their policy.

If the policyholder would like to access the cash reserves on the policy, they will request a withdrawal of funds or a loan. A withdrawal can be tax-deferred of the value of premiums paid up to that point. Whereas, a loan can be taken where interest will be charged. Both a loan and withdrawals will reduce the death benefit by the amount taken out, or yet to be paid back, if the insured passes away before the funds are repaid in full.