Should You Choose Term Life Insurance or Permanent Life Insurance?
The debate on term life insurance and permanent life insurance has gone on for years. It is really not possible to say whether one type is better than the other due to the number or variables each person faces in their own lives. There are many factors that determine which one best suits you and your needs. Below we break down the differences between term life insurance and permanent life insurance.
Term Life Insurance:
- Term life insurance is designed to provide protection for a specific period of time (hint the word term).
- It has a guaranteed level death benefit but no cash value, so at the end of the term, the policy will have no value.
- These policies usually run in pre-determined intervals such as 10, 15, and 20 years & have a level premium.
- People usually purchase this either as an entry level life policy because they are less expensive then permanent life policies or as a way to get a higher amount of coverage that is easier on the wallet.
- It is also very often the product of choice when protection needs may be high for a period of time, then drop back, such as when your family is growing.
- Term insurance can be a good fit for younger individuals and families who need protection against the loss of income of a primary earner for a stated period of time at an affordable cost. In most cases a medical examination will be required.
- For many consumers the only way they can afford the coverage they need for the time when they need it is through term life insurance
- Term conversion privileges are available with most policies. This privilege allows you to convert to a permanent policy that builds cash value, with no additional medical underwriting
Permanent Life Insurance:
- These types of life insurance typically provide both a death benefit & cash savings.
- There are different types of permanent insurance, including whole life, universal life, index-universal life, variable life and variable-universal life.
- If a guaranteed level premium and protection for your entire life is important permanent life insurance is the way to go.
- Over the life of these policies they accumulate & build cash value which the policy owner may be able to borrow or take a loan against and it is tax free.
- These loans can be used to help with debt, down payment on a home, children’s education, or income for retirement.
- Medical exams are required for these types of policies.
- Premiums are higher initially, but remain level, regardless of age, for the life of the policy
- Once you have been approved for the coverage, your policy cannot be canceled by the carrier as long as premiums are paid when due. Regardless of your health, the insurance will remain in force.
Both of these types of life insurance offer valuable protection, but each has features that may be what you are looking for personally. Life insurance is important and can provide financial stability for your love ones in the event of the loss of the breadwinner of the household. In the end it is your decision on which route you take. You can never have too much life insurance! The main thing to remember is while you are making your decision on which type is right for you think what it is exactly that you want that life policy to provide. For more advice and tips see an Insurance Architect today!