Did you know that 28 million people in the U.S. had no health insurance in 2020?
You might have switched companies in the past to get more affordable coverage. And while you may have found better rates at different insurance brokers, you might regret changing companies.
Keep reading to learn the difference between life insurance permanent vs term.
Permanent Life Insurance
Permanent life insurance is a policy that will remain in effect for the rest of the insured’s life. When the insured dies, it provides a death benefit to the policyholder’s beneficiaries. Permanent life insurance does not expire but instead builds cash value over time.
Permanent life insurance also offers riders or additional coverage. These may include disability income coverage and accelerated death benefits. This can be added to the policy to provide extra protection.
Term Life Insurance
Term life insurance is a form of life insurance that is in effect for a set period. It provides coverage during that period. If the policyholder dies during the term, pay out a death benefit to the insured’s family or beneficiaries.
Coverage typically expires at a certain age or after a pre-defined period, such as 10 to 30 years. Term policies are usually straightforward. This makes them an attractive option for those seeking a more cost-effective life insurance plan.
Coverage Between Term and Permanent Life
Permanent life insurance provides lifelong coverage, even after you pass away. With permanent life insurance, you purchase a set amount of coverage, usually called a death benefit, that remains in effect until you die.
On the other hand, if you outlive your term policy, coverage simply expires, and no death benefit is provided to a beneficiary. When deciding how much coverage you need, consider your current and future financial obligations, such as debt, mortgage payments, college tuition, and final expenses.
Consider any sources of income your family would have access to if you were to pass away. Be sure to know about the 1035 exchange that can help you decide. Depending on your financial situation and goals, you might opt for life insurance permanent vs term.
Cost Between Term and Permanent Life
Permanent life insurance is one of the best options when it comes to financial protection. This comes with the benefit of accruing a cash value or savings component, which can be accessed if the need arises during the policyholder’s lifetime. It also has a prorated premium guarantee, meaning you don’t need to worry about rising costs as you age.
Term life insurance is much more affordable but only lasts for a certain period. As the policy expires, further premiums are paid to keep the coverage in effect. If you’re looking for life insurance coverage with lower premiums and shorter duration, term life insurance is the way to go.
Choosing Life Insurance Permanent vs Term
When making decisions regarding life insurance, it is essential to understand the differences between life insurance permanent vs term. Consider your individual needs and budget to help determine what type of life insurance is best for you. To find out more about life insurance, contact your financial adviser today.
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