Here we examine the available options available for you with life insurance.
Are you confused over the difference between a regular life insurance policy and term insurance? Most people don’t fully get the difference between the two concepts.
Knowing the difference is very important. Picking the wrong kind of insurance for your life and income can be damaging financially.
A Term policy is exactly what it sounds like. You are covered for a specific amount of time. The benefits of the policy as provided in the underwriting, such as death of the insured, will be dispensed during the life the policy. It’s like a limited time warrantee. Once the policy expires you can no longer benefit from it.
A permanent policy has the benefit of it being good for the life of the insured. You have a 100% chance of benefitting from this kind of policy. The value of the premium paid also increases with interest being paid with it.
The disadvantage of a policy that is good for the life of the individual that is insured is price. These kinds of policies are more expensive than term insurance.
Generally the cost of a life insurance policy that covers the life of an individual is more expensive initially.
The way the premium of Term and Permanent policies are setup also differ. This can also influence your decision making between the two. Term insurance premiums may start lower but as the policy ages the premium always goes up. With a policy that covers the life of the individual the premium stays flat for the life of the individual and policy.
Deciding between these two types of policies is a complicated process. Factors such as how long you plan to have term insurance and what financial condition you are in need to play a roll in deciding the policy type. Convention thinking may be to buy term and save or invest the saved money. However term insurance has the danger of never being used.
Keep these things in Mind before Buying
Term Rule - If your circumstances show that you only need a temporary policy such as 5-20 years it is a no brainer. Term insurance is the perfect vehicle for you.
Needing a policy in effect longer than the term rule we gave would mean a permanent policy is probably in your best interest.
Keeping some of these points in mind will help you in choosing between these two types of insurance.