The Great Debate: Term or Permanent Life Insurance

Everyone wonders what type of life insurance to buy but the simple answer is...it depends. Whether or not you want to buy term life insurance or permanent life insurance depends mostly on your personal circumstances, and it would be unwise to pass blanket general statements on what the absolute best type of life insurance is. If you are on the verge of deciding between term or permanent life insurance, here are a few guidelines to help you untangle the life insurance web.

Term Life Insurance Facts

Term life insurance provides death benefits only, which means if you die within the term limit, your beneficiaries will receive money. You personally don't receive anything in a monetary sense. Term life insurance typically has premiums that increase as time passes by. In general term life insurance costs less than permanent life insurance, but if you outlive the term, you won't receive any money back from premiums paid for the policy. Term life insurance is a good fit for someone looking to keep a policy in effect for 10 years or less. Beyond 10 years you should consider both term and permanent life insurance. Some term life insurance policies can be converted to permanent near the end of the term, but these features vary among carriers.

Permanent Life Insurance Facts

Permanent life insurance is almost always more expensive than term - so why would anyone choose it over a cheaper term policy? Well, there are plenty of reasons. There is a cash value or savings account attached to the permanent life insurance policy. Depending on the type of permanent life insurance you choose, the added value can be borrowed against, used to pay premiums or added to the death benefit. Permanent life insurance policies have level premiums in contrast to increasing premiums of term life insurance.

Making a Choice

With this in mind, only you can decide which life insurance is best. Talking to an agent can help you with your decision. When purchasing life insurance one must consider age, health, budget and purpose of the money to be left after your death. For example, if you have children, you may want to ensure they have enough money to attend college, or perhaps you want to leave your spouse with enough money to pay for the house and other related expenses. Consider your personal circumstances and you will be able to come to an educated decision on the type of life insurance you want to buy.