Jan 07
Quick snapshot of term life insurance versus permanent
I’ve given the long version of this topic many times. Here’s a quick snapshot of things to consider:
1. Length of Time – Term life insurance ceases at the end of a specified period – typically 10, 20 or 30 years. Permanent continues until age 100 or later so long as premiums are paid.
2. Premiums – Term life premiums are much lower than permanent insurance. Permanent premiums are often 3-5 times higher than that of term.
3. Cash Surrender value – With term life insurance policies, there is no cash surrender value. Where as with permanent policies accumulate cash surrender value or loan value on a tax-deferred basis.
4. Key Advantage – Term policies offer the highest death benefit for the lowest cost. Permanent policies offer lifelong protection and tax-deferred savings.
5. Key Disadvantage – With term life insurance, there are many factors including age, health status, etc.) that can make it too expensive to continue coverage after the term expires, unless you buy a policy with a convertibility option. Permanent policies have initially larger premiums which make it difficult to buy the amount of protection really needed.
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