Life insurance is a valuable safety net to protect your family from financial hardship in the event of your passing. Whether you’re a young adult, middle-aged, or a senior, it’s generally a good idea to have some kind of coverage set up to cover medical bills, living expenses, funeral expenses, etc. However, as there are a variety of policies available, we’re here to help you start thinking about which one could be right for you by discussing permanent vs. term life insurance.
Key Takeaways
- Coverage: Permanent life insurance provides coverage for life, while term life insurance only lasts for a specified number of years.
- Cost: Term life insurance premiums usually cost less than permanent life insurance, which has the potential to increase if you renew the policy.
- Cash value: Permanent life insurance policies usually allow you to build cash value over time, while term life insurance does not.
- Suitability: Term life insurance may be better for those who only need coverage for a certain amount of time or are on a budget. In comparison, permanent life insurance is better for long-term financial planning.
Understanding Permanent Life Insurance
Lifelong Coverage
You can infer from the name—a permanent life insurance policy provides lifetime coverage as long as you keep up with your premiums. If you want to ensure your beneficiaries receive a death benefit regardless of when you pass away, you might need to consider a permanent life insurance policy.
Wealth-Building Potential
One of the most appealing features of permanent life insurance is its ability to accumulate cash value. With cash value policies, a portion of your premium goes into a savings-type account that grows over time. You can access this cash value in the case of a significant life event like paying for college, buying a home, or supplementing your retirement income, if necessary.
Consistent Premiums
Another advantage of a permanent life insurance policy is fixed premiums. The premium price you pay when you purchase the policy will stay the same for the life of the policy. While permanent life insurance tends to be more expensive than term life initially, for some, the long-term stability and additional benefits make up for it in the long run.
Term Life Insurance Basics
Temporary Protection
Term life insurance offers you coverage for a set period of time. Terms are usually between five to 30 years. If you pass away while your policy is active and in good standing, your beneficiaries will receive a death benefit. However, if you pass after your policy expires or your premiums are not up to date, your beneficiaries will not receive a payout. Some ways to work around this would be renewing your policy or converting to a permanent policy, both of which could increase your premium.
Affordable Coverage
If you’re on a budget but still need coverage, term life insurance can offer cost-effective protection for you and your loved ones. The premiums are generally lower than those of permanent life insurance. A term life insurance policy can be a good starting point for young families or adults needing a policy but can’t afford a permanent life insurance policy.
No Cash Value
Unlike permanent life insurance, term policies do not accumulate cash value. You don’t have the option to borrow against or withdraw cash from what you’ve paid in, and you nor your beneficiaries will receive a payout if the term expires before your death. Term life insurance policyholders strictly pay for the death benefit coverage, meaning you’re not building additional wealth over time.
Permanent vs. Term Life Insurance
The primary difference between permanent and term life insurance is the length of coverage, with permanent providing lifelong coverage and term giving coverage for a limited number of years.
The second biggest consideration is how much money you can put towards a monthly premium. Consistent, low premiums make term life coverage an attractive option for those on a tight budget; however, if you renew or convert to permanent coverage, that amount could significantly increase. If your finances can handle a higher premium, permanent coverage can offer more long-term financial benefits. It’s also worth noting that the younger you are when you begin a policy, the lower your premium will be.
Finally, the cash value component of permanent life insurance offers the unique advantage of building cash value, which can be a valuable resource for long-term financial planning.
Get the Benefits You Deserve with Sinclair Law Firm
Has your loved one’s life insurance claim been denied? Sinclair Law Firm is here to help and ensure you get the benefits you deserve! Whether you’re the beneficiary of a permanent life insurance policy or a term life policy, we have the expertise you need to restore your financial peace of mind. Give us a call today for a free claim review, and let us fight the battle for what you deserve!