Term life insurance vs. Permanent Life Insurance

Life insurance is a useful part of every person’s estate plan. In addition to helping support dependents, life insurance can provide immediate cash at the time of death. Though several types of life insurance are available in the market, there are two basic categories: temporary, or term life insurance, and permanent life insurance. Term insurance, as the name suggests, provides protection for a specific period of time, known as the term. It pays a benefit only if you die within the term period. If not, you get paid nothing.
Permanent life insurance provides coverage for life. Permanent insurance accumulates a cash value on a tax-deferred basis over time. This can be borrowed by the policyholder for any purpose they may wish, for instance down payment for a home, payment of children’s education, and so on.

There are three basic types of permanent life insurance: whole life insurance, universal life insurance, and endowments. Whole life insurance provides a guaranteed amount at the time of death and a guaranteed rate of return for a fixed premium. A variation of whole life insurance is the variable insurance, in which you allocate your premiums into a variety of investment options, and the death benefits and cash value will vary according to the performance of that portfolio. Universal life insurance provides flexible premium payment options. After the initial payment, you can pay your premiums at any time and of any amount, subject to certain minimum and maximum limits. Such policies guarantee, to some extent, the guaranteed minimum amount at the time of death, but not the cash function. Endowments are policies in which the cash value built up in the policy equals the death benefit at a certain age.

There’s no clear-cut way to say which type of insurance is better. However, based on your circumstances and financial needs, you can find out whether you should go in for term insurance or permanent insurance. Term insurance is more affordable than permanent insurance, and should be the choice when protection needs may be high for a period of time, such as when your family is growing. Permanent life insurance, while having more expensive initial premiums, is less expensive in the long run. It builds cash value and provides fixed premiums. Also, if you have a disabled child who will never be able to support himself even as an adult, or expect to leave an estate on which your heirs will be required to pay estate tax, consider permanent insurance.

To buy a life insurance policy, an insurance agent is the most preferred route. A good agent can help you assess your needs accurately, and find the right product for those needs. Like most other things, you can also buy life insurance online via the Internet. Websites like estreetloans.com are virtual insurance policy marketplaces, from where you can get life insurance quotes from multiple companies to compare. Once you’ve received a life insurance quote online, it is a good idea to run it by an agent in your community before buying.

Life insurance protects those who depend on your paycheck. Buying life insurance is an important investment that should be done with care and diligence.

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