Know Term Life Insurance and Permanent Life Insurance

There are two basic types of life insurance: term and permanent. Term insurance is purely life insurance while permanent (aka “cash value” or “whole life”) policies include a savings element.

Benefits of a Term Life Policy:

If you die during the term of your policy your beneficiaries get paid -that’s all there is to it. You aren’t paying anything extra to fund a savings account or cover investment fees. And because the market is so competitive for term insurance, companies have a huge incentive to keep prices low. With relatively little effort you can compare, shop and assure yourself of a good deal. You pay only for what you need when you need it. You typically need life insurance coverage for a specific period of time (until the kids are out of college, for instance).

Benefits of a Permanent Life Insurance Policy:

A permanent plan can give you access to some or all of the premiums that you have been paying for in a way favorable to your taxes. It’s with you until you die. This type of policy coverage is guaranteed for your life with no out of the blue payment increases. A term policy will expire at a certain date, and a renewed policy could have much higher premiums. Maybe the best reason for a permanent policy is to make sure your estate and investments don’t get eaten up by the government. A permanent policy can provide peace of mind that your family and loved ones will be taken care of for the future.

Remember, the decision to buy a permanent or a term life insurance policy will depend on your situation, your age, your financial well-being, and other factors. If you are a young family with some investments to protect but not financially stable a term life policy might be a good idea to protect those investments and your family. However, if you are financially stable with considerable investments, it may be a better decision in the long run to purchase a permanent plan.