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Term Life or Permanent Life insurance?

Term Life Insurance

Term life is the more common and sought-after option because of its simplicity and price. With a term life coverage, your beneficiaries will be paid if you die within a predetermined number of years. Unfortunately, if you live beyond the specified period, the policy will end.

Term Life Pros:

Affordable. Because there’s a limit to the amount of years covered, term life insurance is generally cheaper. They are also more accessible since many companies offer them.

Perfect for anticipated life events. Depending on your particular needs, term-life insurance can usually provide adequate coverage. For example, if your kids are young and you expect to need 20 or so years of coverage to support tuition fees, mortgage, etc, you can take coverage suited for this scenario. Likewise, if they’re older and will be needing only a few years of your support, then you can designate your policy to cover only for 10 years.

Term Life Con:

No refund if you outlive the policy. The biggest drawback with term life insurance is that you get nothing back if you live beyond the specified time frame in the contract, which many people see as a waste of money. However, that’s what insurance is for, to provide security and peace of mind that your family is protected during the times you need them be. Even if you survived, you’ll thank your insurance because you were able to sleep peacefully all these years.

Permanent Life Insurance

On the other hand, permanent life insurance doesn’t expire, and provides death benefits to your beneficiaries for life as long as your payments are updated. Furthermore, it offers a cash-value feature, a sort of like a savings account separate from your death benefits account which lets you earn tax-deferred money.

Permanent Life Insurance Pros:

Lifetime coverage. This is the most obvious benefit from a permanent life insurance. Because no one knows exactly when he’ll die, you’ll have that security that your family is protected forever.

Build up savings. Permanent life insurance is perfect when you’re having difficulty saving. With its cash-value feature, you’ll earn tax-free funds which you can borrow, withdraw, or used to take a loan against.

Pay for estate taxes. If you have properties that may be subjected to estate taxes, you can rest assured that your insurance can pay for them instead of leaving this obligation to your family.

Permanent Life Insurance Cons:

Expensive. Permanent life insurance truly offers more benefits but these benefits such as lifetime coverage and cash-value feature are what make permanent life more expensive. Aside from the higher premiums, there can also be higher fees and administrative costs. Because of this, it would be harder to sustain it in the long run and you could lose the policy if you lapsed on your payments.

Can be complicated. Under permanent life insurance, there are other types of policies which might be hard to understand. There could be confusing terminologies and illustrations, and finding the best policy especially for a first time buyer can be frustrating.

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