Term Life Insurance vs. Permanent Life Insurance: Which One Should You Choose?

Weighing the pros and cons of term life insurance vs. permanent life insurance is a daunting task and one that should be carefully considered. Ultimately, the choice is yours and depends on your individual needs. So, here are some considerations which can help you make an informed decision.


Coverage Length

Term life insurance is temporary life insurance coverage that is purchased for a set period of time, usually for 10, 20, or 30 years. This type of policy does not build cash value and does not have any additional features such as long-term care or disability income protection.

Permanent life insurance, on the other hand, provides coverage for your entire life, as long as you pay the premiums.

Premium Cost

The premium for term life insurance is typically much lower than the premiums for permanent life insurance. The premiums are generally fixed for the term of the policy and can be renewed at the end of the term.

Permanent life insurance is designed to provide lifetime coverage and has more features than term life insurance. The premiums for permanent life insurance are usually higher than those for term life insurance, but they can also be flexible. The premiums may be adjusted to generally increase or decrease each year, depending on the policy.


Cash Value

Unlike permanent life insurance, there is no cash value associated with a term life policy, meaning that the policyholder does not accumulate any money over the duration of the policy and does not receive any payments for surrendering the policy early.

Permanent life insurance, on the other hand, provides lifelong coverage and typically offers a cash value component. This means that the policyholder accumulates a cash value over the life of the policy and can withdraw money from the policy while they are still alive. Permanent life insurance policies come in various forms (whole life, universal life, variable life) and have different features, but the common theme is that they all have a cash value component. This cash value can be used to pay premiums, take out loans, or cash out the policy.


Death Benefits

Term life insurance pays out a death benefit to the beneficiary upon the policyholder’s death. The amount of the death benefit is usually determined when the policy is written, and it cannot be changed during the term of the policy.

Unlike term life insurance, a permanent life insurance policy does not have an expiration date and will continue to provide coverage until the policyholder’s death. The death benefit of a permanent life insurance policy is typically much larger than a term life policy, as the policy accumulates cash value over time. The cash value can be used to pay premiums, cover living expenses, or provide additional financial resources in the event of the policyholder’s death.


Convertible Policies

Convertible term life insurance is a type of policy that can be converted to a permanent life insurance policy. This type of policy provides the flexibility of starting with a term life insurance policy, which typically has lower premiums, and then converting to a permanent policy without having to take a new medical exam. This is beneficial for people who may be in good health when they purchase the policy but may not be able to qualify for a permanent policy later in life due to health issues.

Nevertheless, a permanent life insurance policy is not convertible.


Which is the Better Option?

The better option between term life insurance and permanent life insurance depends on the particular needs and financial goals of the individual. Term life insurance is a simple and inexpensive way to provide financial protection for a specific period of time. It is the most basic form of life insurance and is best suited for those who need a temporary insurance solution or those who have a limited budget.

On the other hand, permanent life insurance provides lifelong coverage, with a savings component that can accumulate cash value over time. It is more expensive than term life insurance, but it also offers greater flexibility and more features, such as the ability to access the cash value or take out a loan against the policy. Permanent life insurance is best suited for those who want to protect their family for the long term, those who want to accumulate cash value over time, or those who want to use the policy as a tax-advantaged savings vehicle. Ultimately, the best option depends on the individual’s needs and goals.


If you are still confused on which one is the best choice for you and your family, contact CPR Investments Inc. today.

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