When considering
life insurance, one of the questions you’ll encounter is whether to
buy Term Insurance or Permanent Insurance. Emotions sometimes run
high on both sides of the argument, so let’s break it down and then
you decide.
The word “term”
means the number of years the life insurance policy will remain at
the same price. Therefore, “Ten Year Term Insurance” is term with
level premiums for ten years, after which the premiums will either
go up—fast and dramatically—or the policy will just terminate. The
downside to term insurance, if we can call it a downside, is that
you might outlive the “term.” The upside is that Term Insurance is
usually very affordable, and therefore has enabled millions of
Americans to purchase large amounts of insurance protection.
These days there
are four common term insurance choices: 10 Year Term, 15 Year Term,
20 Year Term or 30 Year Term. In all cases the premium is level for
the term period. In addition, most term policies will permit you to
“convert” the term insurance to “permanent insurance” during the
term period.
The primary use of
Term Insurance is to provide protection for a need that is not
“permanent.” Examples of this would include mortgage protection, or
insurance to protect minor children, or to protect a business if a
key person died.
“Permanent
Insurance” is meant to last for the rest of your life, and includes
“Whole Life,” “Universal Life” and “Variable Life.” Permanent
Insurance is more expensive than term because it is providing
protection for the “whole life.” In other words, rather than
providing insurance protection for fifteen or twenty years,
Permanent Insurance usually charges the same premium all the way to
age ninety-five – sometimes even up to age 121! Most Permanent
policies also have Cash Value, which is like a savings account
inside of your insurance.
Both types of
insurance have a specific purpose—neither is “better” than the
other. If you have questions about which type is suitable for you
just ask one of our professional staff. |