Term Life Insurance vs. Permanent Life Insurance: Which is Right for You?
If you’ve already done some investigating into your life insurance options, you probably know there are two primary types: term life insurance and permanent life insurance. If you’re not sure which it right for you, it’s important to first have a clear understanding of the benefits of each.
Term Life Insurance
Term life insurance covers you for a specific period of time, generally 10, 15, 20 or 30 years.
If you pass away within that time period, your beneficiaries receive the face value of the policy, also known as your death benefit, tax free. Term life insurance policies provide protection, at a fixed premium, for the specified period of time. Term policies are less expensive when you’re young and healthy. If you purchase a 10 year term policy, and your health deteriorates during that period of time, you will face much higher premiums when you apply for a renewal. This is why it’s important to consider how long you expect to need life insurance coverage: until the kids graduate college, until you and your spouse retire, etc. Be sure and lock in a term policy today that will cover you for that period of time, to avoid paying higher premiums down the road.
Because term life insurance policies are generally much less expensive than permanent policies, term coverage is a great option for young families or those looking for inexpensive coverage. If you fall into this category but would like to invest in permanent coverage down the road, consider purchasing a term life insurance policy that offers a conversion period. Conversion periods allow you to convert some, or all, of your term coverage into a permanent policy, for a specified period of time. For more information, see our post on conversion periods.
Permanent Life Insurance
Permanent life insurance provides coverage for the remainder of your life. Permanent coverage includes whole life insurance and universal life coverage. These policies earn cash value over time, meaning you earn a return on a portion of your premiums. The cash value of a permanent life insurance policy is tax deferred, until you make a withdrawal, and is still available if you surrender a policy before the time of your death.
Permanent life insurance coverage is ideal for those looking for life insurance as well an investment tool.
Which is Right for you?
If you’re still not sure whether term life insurance or permanent life insurance is right for you, ask yourself the following:
How long do I need coverage?
If the answer is a specific time period rather than indefinitely, term life insurance is probably your best bet. If however, you would like to leave a legacy regardless of your age at the time of your death, consider permanent life insurance coverage.
What’s my budget?
If you’re working with a limited budget, term life insurance will provide coverage at the lowest rate. If you’re looking for more than basic coverage, we recommend purchasing permanent life insurance.
What am I looking for in a policy?
If you’re looking to begin investing from month to month, a permanent life insurance policy will not only provide coverage but help you begin building an investment portfolio. If you’re simply looking to provide financial support to your loved ones in the event of your death, term life insurance will provide the coverage you’re seeking.
Interested in more tips and advice about selecting a life insurance policy that meets your needs? Follow the IntelliQuote Life Insurance Blog for the news and information you’re looking for – while you’re here, check out these recent posts:
Protecting Your Family in Any Economy
A Young Families Guide to Financial Planning
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A leading online life insurance agency since 1997, IntelliQuote provides customers simplified, private access to compare, shop and buy life insurance online, including term life insurance quotes. IntelliQuote offers clients a wide selection of competitive products from A-rated carriers, supported by licensed agents. This simplified approach makes purchasing a policy easy and straightforward while providing a savings of up to 70% per policy. IntelliQuote is a member of the LIFE Foundation and is committed to ongoing consumer education. For information on how to estimate how much coverage an individual might need, contact www.intelliquote.com, or 888.883.6855.
