Term vs Perm - Which is Better?

Term Life Insurance

Term Life insurance is temporary insurance. It will expire after a set term. You will be covered during that time period and oftentimes, the premiums you pay, do not get returned to you. In fact 98% of the people who purchase term life insurance, end up not using it. 

Note: there are often situations where you can get an option to have the premium payments returned to you, or you can continue paying and convert it to a permanent policy, but more on that later

But the benefit to Term Life Insurance is that you can get large amounts of insurance, for a much cheaper cost. For example, a policy on myself (A 33 year old male with no real prescriptions being taken) would see premiums of about $25 for $100,000 in insurance. And term policies can go up to policy amounts at or above $1,000,000. 

Who needs term life insurance? Well people are working, business owners, parents, people with spouses, those with debts like car payments or credit card payments. These are all things that need to get paid by someone when we die. Especially if we are married. Term Life insurance can be used to replace income for a period of time, ensure that your family doesn't have to sell your house if you pass, and/or make sure that end of life arrangements are taken care of. 

With term life insurance, you can also find companies and policies which offer living benefits as well. So that if something happens and we are still alive, but we cannot work such as a disability or a terminal or chronic illness diagnosis, then those benefits could see the life insurance become useful before our death. 

Permanent Insurance

Now what about permanent insurance?

Well permanent insurance is often more expensive. It does not expire. And this is good because we will all die at some point. So having this in place ensures that we are protected for decades. But what else can it do for me?

Permanent insurance options fall into two categories: 

1. Whole Life Insurance

2. Universal Life Insurance

Because of the complexity of Universal Life Insurance, that will has its own post you can find here. This article will focus on whole life insurance. 

Most whole life insurance policies are used to at a minimum ensure that the end of life arrangements are taken care of. But, these permanent policies contain within them cash value that could be borrowed against in the future and can even grow with interest as the insurance company uses the money within in to invest and shares the profit with its policy holders. A pretty cool feature.

Many whole life insurance policies also have the ability for you to gain access to the same or even other living benefits that term life policies have. In fact, very rarely do we even look at a whole life or term life policy that does not have living benefits, but we cover that in a different blog post. 

Conclusion

In conclusion, which is better? Well in short again, neither and both. Both of them help us achieve different goals. A balanced financial and insurance plan has us having both of these types of policies. 

Term can help us have alot of insurance at a relatively less expensive cost. Whereas Permanent policies ensure that we have the protection past the points that term would guarantee. 

Which one is best for you at this moment in time depends on your goal for the insurance and would require a broad conversation of how insurance can help bring your and your family Peace of Mind, both now and in the future.