If you’ve been shopping for life insurance you’ve probably noticed that there is term life insurance and permanent life insurance. Both have their advantages and drawbacks and are quite different from one another despite both being forms of life coverage. If you’re getting confused by the difference between term and permanent life insurance, consider what each offers in relation to what you’re looking for and decide on which policy is best for you.
To help you navigate your way through the term vs permanent life insurance debate, each is broken down here in terms of what they cover and how much they cost.
Term Life Insurance
Sometimes known as pure life insurance, this policy provides life insurance for a specific amount of time. Its main purpose is to give your loved ones some protection if you pass unexpectedly. If you do pass and you have term life insurance, your designated beneficiaries will receive the death benefits spelled out in the policy. Other than this, the life insurance policy has no value.
Term life insurance can be available for a term as little as one year or for as long as 30 years. Even with the longer term policies, your premium will usually stay the same for the entire life of the policy, but if you’re concerned about cost, you can find term life insurance quotes without personal information.
The best thing to do with term coverage is to cover yourself for a period of time that you think your beneficiaries will be most vulnerable if they were to lose you. For example, if you’re concerned that your family will be stuck paying off the mortgage if you pass early, you can pay for insurance that will cover them for the remaining time on your mortgage. Or you can choose to get term life insurance for the amount of time until your children are grown. Think about what works best for your individual needs and decide from there.
Permanent Life Insurance
Also called whole life insurance, permanent life insurance is an insurance policy that provides you with coverage for your entire life (no set time limit). In addition to coverage, a permanent life insurance policy also works as an investment since the policy has a cash value. In terms of the cash value of the policy, the investment increases over time and the gains are tax-free (you won’t have to pay taxes on the increases). Since this is an investment, you can borrow on the policy or surrender it completely for the value of it. If you choose to borrow on the policy, you have to repay the loan with interest or will face a penalty that comes out in a reduction of the death benefit of the policy. Surrendering the policy will leave you without coverage. Like term life insurance, the premium for permanent life insurance usually remains the same throughout the life of the policy even as the cash value of the policy increases.
Life Insurance Quotes Comparison
In general, term life insurance vs permanent life insurance breaks down to the fact that term coverage is cheaper than permanent life insurance. This is because term life insurance has no other value outside of the death benefit that is paid out and because it’s for a set amount of time. When comparing term versus permanent life insurance, the premiums for permanent insurance are usually much higher since it has to cover a person for their entire life and there is an assured rate of investment with it. Each life insurance company will offer their own quote which will depend on the individual policy but as an example, a $500,000 20-year term life insurance policy for a man aged 30 costs about $245 a year while a whole life insurance policy for the same person at the same $500,000 would cost over $5,000 a year. Again, this is not a specific life insurance quotes comparison, it’s just a general estimate.
Choosing the Best Option
If you’re looking specifically for life coverage that will take care of your family in the event that you pass prematurely, term coverage is best suited for you. If you are looking for permanent coverage that also has a cash value, you are better off paying the higher premium and getting whole coverage. If you do want whole life coverage but aren’t able to pay the higher premium at this point, you can always get term life coverage for the time being since more term policies are convertible to permanent policies within a set amount of time within the policy.
When looking at permanent life insurance vs term coverage you should shop around for coverage that will provide you with exactly what you need that still falls within your budget. Here at Pacific Insurance Group, we provide our beloved clients the sense and security of a great life coverage plan.