Term Life Insurance or Permanent Life Insurance?

When people think of buy life insurance, they get depressed and usually equate it with early death. However, if your death will leave anyone in financial difficulties, then you should think about getting cover – it would only be fair to the affected parties.

With this in mind, which is a better option? Should you go for Term Life Insurance or Permanent (Whole Life) Insurance? Which is better and which one should you take? When should you seriously consider life insurance?

Usually when your first child arrives, you start thinking more about the future than before. You would not like to leave them without any money in the long road ahead. You would also like to provide them with a chance to go to university (which is extremely expensive these days) and other things in life to smooth the way for them if you ever die.

So, a short recap on what each offers and the pros and cons of each will suffice to make the comparison.

Term Insurance is a type of “pure insurance protection” that will payout a certain amount of money if the insured party dies within a specified timeframe. In the event of death of a policy holder, the insurance company will pay out the face value of the insurance policy (eg: $250,000) to the named beneficiaries. All the premiums paid are used to cover the cost of insurance protection.

The term can range from one to twenty (and in some cases, even thirty) years. However, if the insurance is not renewed, the coverage ends when the time frame stipulated in the policy ends. Being temporary, this type of insurance is the easiest and cheapest to acquire, and that is why it is more popular than permanent insurance.

Permanent Insurance on the other hand, provides complete and unending assurance of payment to the policyholder. It does not matter when the policyholder will die, they will get paid out and the policy does not expire.

Permanent insurance usually also acts as a savings account and it is this that sets the price at a higher level, while providing a stable growth of the payout. Also, payments need to be strictly on time, otherwise the policy will lapse.

The characteristics defining each are:

Looking at the above will give you an estimation of the benefits versus cons of each type of policy. There are many other things to consider (such as riders), but the main point is what you are able to afford and how you plan your finances.

Taking out life insurance will most probably the least thankful thing you can do in this life, but if you plan well, the pressure that is relieved from having financial troubles at the time of death is invaluable. Bet on the fact you will live, but buy for peace of mind – that will give you the least stress and the lowest out of pocket expense.

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