Term or Permanent: Which is Best for You?
Generally speaking, there are two categories of Life Insurance, term life insurance and permanent life insurance. Often, the solution is a combination of both, since most people have a need for both temporary (term insurance) and lifetime (permanent insurance) protection.
To help you decide, consider five basic factors:
 Death benefit
Duration of coverage
Premiums
Cash value
Net cost of insurance
Death Benefit
Permanent life insurance provides a death benefit for as long as you live.
Term life insurance provides a death benefit for a stated period of time.
Duration of Coverage
The longer period of time that insurance protection is needed, the more consideration you should give to permanent life insurance. For short-term needs, term life insurance may be appropriate.
Examples of permanent needs are:
Use of death benefit to pay bills or provide money for loved ones
Use of death benefit to pay final expenses
Use of death benefit to provide money for a favorite charity
Use of death benefit to pay estate taxes
Fund a business buy/sell agreement or provide key person protection
Examples of temporary needs are:
Use of death benefit to pay educational expenses
Use of death benefit to pay off home mortgage
Use of death benefit to pay off a loan
Premium
Permanent life insurance premiums are generally level and payable for life.
Term life insurance premiums will increase over time, are payable for a specific period of time and generally increase at each renewal.
Cash Value
Cash values can provide money later to help with temporary needs or emergencies.
Permanent life insurance accumulates cash values:
You may borrow against the cash value as a policy loan at the current policy loan interest rate.
Term life insurance does not accumulate cash values, nor does it earn dividends.
Net Cost of Insurance
The net cost of insurance compares the premium payment and the cash value. You get the net cost of insurance by subtracting the total premiums paid from the cash value.
For example, compare, over a 20-year period, a term life insurance policy for a 35-year-old male non-smoker insuring for $100,000 with a permanent life insurance policy of the same criteria.
How to choose
Together, you and your advisor can assess your Life Insurance needs to help you choose the coverage that is best for you.
Contact Fred for additional information or if you have any questions. He can also give you details on cost, coverage and restrictions.
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