Term Life Insurance Articles
How To Decide Between Term Life And Permanent Insurance
2010-10-06
Life insurance is an important investment that all individuals and families should consider purchasing. The two main choices for insurance include term life insurance and permanent insurance. Applicants always wonder which policy is right for them, but it really depends on what the reason for purchasing a policy is. Each one has its benefits and drawbacks and each person must decide which one is right for their financial needs as well as their situation. No policy is right for everyone.
Term life insurance is only valid for a set period of time, as the name implies. It can be effective for 10, 15, 20, or 25 years. If the insured dies anytime during this period, the beneficiary will be paid the death benefit. Initially, the premiums for term life insurance are significantly lower than permanent insurance; however, once the policy expires, the insured can choose to purchase another policy, but must keep in mind that the premiums will likely increase with age. As well, with term life insurance, there is no accumulated cash value. Term life insurance is a good choice for individuals or families who are only concerned about the death benefit. This death benefit will help to lower large debts such as a mortgage, car loan, or post-secondary education tuition. Once the term of the policy ends, such debts are usually paid off and this type of policy is no longer required.
Permanent insurance also provides a death benefit for the beneficiary but it is combined with cash value or savings that accumulate over time. These savings are usually tax-deferred. The insured can borrow from this cash value to pay for large purchases such as college education or they can convert it to a retirement savings. For this reason, the premiums for permanent insurance are higher than those for a term insurance policy. However, an advantage to having a permanent life insurance policy is that the premiums are fixed and will not increase for the life of the policy. Unlike term insurance, this type of policy is in place until the insured dies, regardless of age.
It is important to determine exactly what benefits are expected from an insurance policy before making a final decision. Is the reason for an insurance policy to provide income for the surviving spouse and children? Is it to pay off large debts that are left behind when a person dies? Or is it to simply pay for funeral arrangements? Whatever the reason, a person should always weight the pros and cons for each type of policy. This way, the surviving family members will have one less thing to worry about if a loved one dies.
Free Insurance Quotes
Life insurance is an important investment that all individuals and families should consider purchasing. The two main choices for insurance include term life insurance and permanent insurance. Applicants always wonder which policy is right for them, but it really depends on what the reason for purchasing a policy is. Each one has its benefits and drawbacks and each person must decide which one is right for their financial needs as well as their situation. No policy is right for everyone.
Term life insurance is only valid for a set period of time, as the name implies. It can be effective for 10, 15, 20, or 25 years. If the insured dies anytime during this period, the beneficiary will be paid the death benefit. Initially, the premiums for term life insurance are significantly lower than permanent insurance; however, once the policy expires, the insured can choose to purchase another policy, but must keep in mind that the premiums will likely increase with age. As well, with term life insurance, there is no accumulated cash value. Term life insurance is a good choice for individuals or families who are only concerned about the death benefit. This death benefit will help to lower large debts such as a mortgage, car loan, or post-secondary education tuition. Once the term of the policy ends, such debts are usually paid off and this type of policy is no longer required.
Permanent insurance also provides a death benefit for the beneficiary but it is combined with cash value or savings that accumulate over time. These savings are usually tax-deferred. The insured can borrow from this cash value to pay for large purchases such as college education or they can convert it to a retirement savings. For this reason, the premiums for permanent insurance are higher than those for a term insurance policy. However, an advantage to having a permanent life insurance policy is that the premiums are fixed and will not increase for the life of the policy. Unlike term insurance, this type of policy is in place until the insured dies, regardless of age.
It is important to determine exactly what benefits are expected from an insurance policy before making a final decision. Is the reason for an insurance policy to provide income for the surviving spouse and children? Is it to pay off large debts that are left behind when a person dies? Or is it to simply pay for funeral arrangements? Whatever the reason, a person should always weight the pros and cons for each type of policy. This way, the surviving family members will have one less thing to worry about if a loved one dies.
