Permanent Life or Term Life Insurance – A Comparison


Choosing the most appropriate type of life insurance for you and your family can be a daunting task. All life insurance provides funds in the event of the insured’s death, but many factors including: the purpose for which the funds are intended, the cost, and the needs of the beneficiary, have to be the main reasons for selecting the life insurance that’s right for you. Here is an explanation of the different types of life insurance. This is article is only intended as a guide, so be sure to speak with professionals like State Mutual Insurance before you make any final decisions about your life insurance.

Types of Life Insurance

Life insurance products, break down into two large groups: Permanent Life and Term Life. Each has its own specifics attributes.

When Permanent Life Is the Right Choice For You

Permanent Life is usually called Whole Life insurance and is an extended term insurance policy with an attached component that accrues savings. So you are also investing as you are being covered. The investment component increases at a similar rate as the mortality rate. So as the investment component grows, the insurer actually pays out less. But, the face amount paid out to you remains unchanged. These policies typically have higher premiums because of the investment component, but usually provide very low investment returns because of the conservative nature of insurance companies.

There are many detractors to Whole Life insurance. Most feel that it is best to separate insurance from savings, because you can get a better deal for each separately. If however you are in a high tax bracket and have no time or no interest in managing your investments, or are simply not interested in managing your investments, Whole Life insurance may be perfect for you. Since a Whole Life policy can never be canceled, if you have health problems or worry you may have some in the future, Whole life insurance is right for you. As long as you continue to pay the premiums, you will be covered.

If the investment component of Whole Life is unappealing, but you like the other features, insurers have a product called Universal Life insurance, which detaches the insurance and investment components of the policy. This policy allows the owner to vary the death benefit, accumulated cash value, and premiums, as his or her circumstances change.

When You Should Choose Term Insurance

If you are only interested in a pure life insurance policy, your choice should be Term Life. These policies provide a specific death benefit, and as long as premiums are paid during the term, protects an individual for the specified period of time. If the insured person is alive at the end of the contract period, the insurance is canceled and there is no payout to the policy holder.

If you seek the most coverage at rock bottom prices, for a specified period of time, Term Life is appropriate for you. Parents, for example, who want to save for their kids future, often buy large Term Life policies because they cover them for very susceptible periods of time. These policies are also great when you need to be sure to meet a specific financial obligation that will end at a certain future date, such as home mortgage payments.

Everyone should have life insurance. The only decision you make, should be whether you choose Term Life or Permanent Life Insurance.