A Simple Look at the Different Types of Life Insurance

​

Those shopping for life insurance often battle with this question: Should I buy term life or permanent life insurance?

The answer should be based on the reasons you need life insurance.  I will layout the two different types of insurance that can help answer the question above.

​

Term Life Insurance

• Term is for you if your insurance need has a definite end.  That could be retirement, years to pay off the mortgage, or children finished college or trades school.

• Term options can be 10,15, 20, 25, or 30 years

• Consider term life insurance if you:

  • Want life insurance to cover a specific financial concern that has an endpoint.

  • Are looking for the cheapest form of life insurance and you don’t need coverage indefinitely

• The Pros and Cons of Term Life Insurance

  • Pros

    • Lower Cost

    • Guaranteed Issue Options

    • Riders available such as- Return of Premium or Living Benefits

      • Return of Premium: you will receive your premiums back at the end of the term​

      • Living Benefits: If a terminal or critical illness happens to the policyholder, you can access part of the death benefit throughout treatment for living and/or medical expenses.

      • Can convert to a whole life policy (depends on carrier)

  • Cons

    • No cash value​

    • Possibility to outlive your policy 

    • If you outlive your policy and still need coverage, you can purchase another term at a higher rate based on age and health

​

Permanent Life Insurance

• Permanent life insurance is that is lifelong coverage

• Remains in force as long as you pay your premiums

• Ability to accumulate cash tax-deferred or tax-advantaged

• Ability to take a loan from yourself as cash is accumulated in your policy

• Consider permanent life insurance if you:​

  • Want to build cash value within a life insurance policy​

  • Want to cover funeral expenses and retirement or savings will not be sufficient

  • Would like to leave an inheritance or trust for your family.

  • Want a policy that grows with an index, but offers protection from loss in the stock market

• The Pros and Cons of Permanent Insurance

  • Pros​

    • Cash value that can be taken out and used for what you choose​

    • No penalty if you take the cash value out before 59 1/2

    • Lasts your entire lifetime

    • Can provide income in your retirement years

    • Lock in your premiums rate for life, meaning the carrier can not increase your premium

  • Cons

    • Premiums are higher on permanent life policies​

    • Higher rate of surrender before gaining 

    • If not structured and educated properly can be a waste of money for the policyholder

​

Types of Permanent Life Insurance Policies

*Credit for this grid to, Maxime Troll