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Term and Permanent Life Insurance Options

Term and Permanent Life Insurance Options

May 31, 2023

Choosing a life insurance plan that works for your circumstances can feel like choosing from a seemingly endless array of options. Two of the biggest life insurance categories are “term” and “permanent” life insurance.

What Is Term Life Insurance?

Term life insurance provides temporary coverage of up to 40 years. These plans are generally quite affordable — often ranging from $20-30 a month — and can be a good fit for households with a limited budget. These policies guarantee a death benefit but do not guarantee cash value after you pass. They are also relatively low risk plans, with the main risk being that they might expire before you die.

Some types of term life insurance include:

  • Annual renewable
  • Decreasing term
  • Group
  • Accelerated underwriting (AU) term
  • Return of premium

You might choose term life if you…

  • Retire with enough savings to self-insure
  • Don’t plan to financially support adult children
  • Have outstanding debts or mortgage
  • Want the ability to convert to long-term life insurance

What Is Permanent Life Insurance?

Permanent life insurance never expires, so long as you pay the premium. The cost varies by policy type, but it is often 5-15x the policy rates for term insurance. Premiums also vary by policy. With these plans, you are guaranteed a death benefit and cash value after passing. Permanent plans are riskier than term plans, however, as their high-cost premiums are difficult to maintain, and their cash value has a low rate of return.

Some types of permanent life insurance include:

  • Final expense
  • Universal
  • Variable
  • Whole (most common)

Each policy type grows cash value in different ways, which is something else to consider when choosing a plan.

You might choose permanent life insurance if you…

  • Have complex finances or require lifelong coverage
  • Have lifelong dependents (like disabled children)
  • Plan to use the death benefit to pay estate taxes
  • Are investing in life insurance for retirement
  • Need funds for funeral expenses
  • Aren’t eligible for traditional coverage

Both term and permanent life insurance plans pay a tax-free death benefit if you die while your policy is in force, which can be used to cover outstanding debt, funeral expenses, etc. Which type works best for you is dependent on your circumstances.

Call the office today to discuss which type of life insurance is right for you or how your life insurance policy could become an asset.

This material was developed and prepared by a third party for use by your Registered Representative. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The content is developed from sources believed to be providing accurate information.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable by having the policy approved. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications.