Term versus Permanent Life Insurance
There are many differences between term and permanent life insurance. And depending on your personal situation, whether you purchase term life, Permanent insurance policy or some combination of both.
The main purpose for term life insurance is to offer pure insurance protection for a predetermined period of time. Permanent life insurance provides lifetime insurance protection and a cash value component. While term insurance may be the most affordable option if you are buying life insurance predominately for the financial protection it offers, and if your need for a lot of life insurance is temporary (until your children leave the nest, for instance).
InsureTomorrowToday.com usually recommends term life insurance as its low premiums allow consumers to get maximum coverage at little cost. You can then invest your own money into an IRA or other investment. Term life’s reasonable rates allow you to buy policies with larger death benefits than you could otherwise afford. Term insurance is relatively easy, you choose a term (10, 20, or 30 years) and a dollar amount. And until the end of that term, your family would receive that dollar amount TAX-FREE upon the unlikelihood of your death.
Also if the policy is convertible and renewable, you should be able to convert to some other form life insurance or renew that policy without a medical exam.
Because some of the premium of a permanent insurance policy is being put into a “savings account”, you can imagine the premiums would be more expensive. One thing to keep in mind about permanent insurance is that it’s designed to be held for life. The longer a policy has been in effect usually equates to a higher cash value since more money has been paid in and the cash value has earned interest, dividends or both. Cash value growth is generally on a tax-deferred basis, meaning that you pay no taxes on any earnings in the policy as long as the policy remains in force.
Many people own both types of policies. They have a term life insurance policy and somewhere down the line purchase a permanent policy to enhance their retirement portfolio.
