Permanent or Term Insurance: Which should you choose?

When it comes to life insurance policies, those with families tend to think about making sure that if something were to happen to them, they have a policy that will take care of the necessities of their household members. Younger individuals, on the other hand, rarely think about life insurance. They're typically too busy living in the moment and enjoying themselves to think about the possibility that their life could suddenly end. Unfortunately, this shortsighted view can be costly, on several different levels. You see, when it comes to life insurance, the earlier you purchase it, the more affordable it is. This is especially true for those that are under fifty years of age. That's the line where the price of life insurance tends to make a significant jump into higher premiums.

If you're thinking of purchasing life insurance but you don't know a lot about the various kinds of policies, all the options you're presented with could be a little overwhelming. So, let's break them down a bit. Your first basic decision will be to decide if you want permanent life insurance or term (which is simply temporary) life insurance. Term life insurance policies are available in different term lengths. This means there's a chance that the rates and/or the coverage amount may change each time your term policy comes up for renewal. If you're considering a life insurance policy with a short term (say, one- to five years), you'll need to find out exactly what will happen at renewal time. For instance, will your renewal be guaranteed? Or, will you have to take a medical exam to be renewed or forced to switch to another policy? While you may be as healthy as a horse now, a downturn in your health could mean that you're rejected the next time a qualification comes around.

Conversely, permanent life insurance policies do not have end dates. Once you purchase the policy, you'll have it for the rest of your life (as long, of course, as you continue to make any necessary premium payments). There are no changes or renewals to be concerned with. The other main difference between the two is that permanent life (also commonly known as whole-life) policies accrue a cash value that you can withdraw or borrow against. Because of these reasons, you'll find permanent life insurance to be significantly more expensive than term life. Look at it this way: with a term life insurance policy the insurance company is essentially betting that you will not die during the term of the policy you purchased, and they will only cover you for that specific period of time. As soon as the term ends, benefits will no longer be payable. That means if you died literally an hour after the policy's expiration date and time, there would be no payout to your beneficiaries.

So, which type is right for you? That depends on a number of personal factors, such as your age, your familial status, your financial goals and your budget. Compare the policies of a number of different insurers and talk to a few experienced agents. They'll be able to help you find the life insurance plan that's most advantageous for your needs.

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