- Term and Permanent Life Insurance -
Term or Permanent Life Insurance
How do you know if you have the right coverage? Here's a quick look at all of the options: term, whole, variable and universal.
Term life policies offer death benefits only. If you live past the length of the policy, you (or, more specifically, your family members) get no money back.
Permanent life policies offer death benefits and a "savings account" (also called "cash value") so that if you live, you get back at least some of, and often much more than, the amount you spent on your premium. You get this money back either by cashing in the policy or by borrowing against it.
Permanent life insurance premiums are more expensive than term premiums because some of the money is put into a savings program. The longer the policy has been in force, the higher the cash value, because more money has been paid in and the cash value has earned interest, dividends or both.
However, the premiums for permanent life stay the same over the years, while the premiums for term life increase. That extra premium paid in the early years of the permanent policy gets invested and grows, minus the amount your agent takes as a sales commission. The gain is tax-deferred if the policy is cashed in during your life. (If you die, the proceeds are usually tax-free to your beneficiary.)
The rate on permanent life insurance varies, depending on your age, health, insurance company, the types of policies chosen, interest and dividend rates, and more. Luckily, there are some guidelines you can follow for purchasing your policy. If you plan to keep the policy less than 10 years, Term is clearly the solution. If it is more than 20 years, Permanent Life is probably the way to go. Here is where you need an expert to run the term vs. permanent analysis for you.
For help deciding which policy is the best for you and your family, give us a call and we will happily walk you through all of your options.
How do you know if you have the right coverage? Here's a quick look at all of the options: term, whole, variable and universal.
Term life policies offer death benefits only. If you live past the length of the policy, you (or, more specifically, your family members) get no money back.
Permanent life policies offer death benefits and a "savings account" (also called "cash value") so that if you live, you get back at least some of, and often much more than, the amount you spent on your premium. You get this money back either by cashing in the policy or by borrowing against it.
Permanent life insurance premiums are more expensive than term premiums because some of the money is put into a savings program. The longer the policy has been in force, the higher the cash value, because more money has been paid in and the cash value has earned interest, dividends or both.
However, the premiums for permanent life stay the same over the years, while the premiums for term life increase. That extra premium paid in the early years of the permanent policy gets invested and grows, minus the amount your agent takes as a sales commission. The gain is tax-deferred if the policy is cashed in during your life. (If you die, the proceeds are usually tax-free to your beneficiary.)
The rate on permanent life insurance varies, depending on your age, health, insurance company, the types of policies chosen, interest and dividend rates, and more. Luckily, there are some guidelines you can follow for purchasing your policy. If you plan to keep the policy less than 10 years, Term is clearly the solution. If it is more than 20 years, Permanent Life is probably the way to go. Here is where you need an expert to run the term vs. permanent analysis for you.
For help deciding which policy is the best for you and your family, give us a call and we will happily walk you through all of your options.
