Every year in the United States over 2.8 million people die. While this can be an extremely scary and emotional time, it also throws up a lot of practical hurdles for the people you leave behind.
So it might surprise you to find out that only around 60% of Americans have life insurance coverage. Getting cover as soon as possible means that, no matter when you die, your family and friends will be supported.
In that case, you’ll want to know the difference between term vs permanent life insurance. Well, you’ve come to the right place!
Read on to find out how to choose between term life insurance vs permanent life insurance.
What is Permanent Life Insurance?
Permanent life insurance policies cover you from the date that you sign up for them until you die, provided that you keep paying your monthly or yearly premiums.
Often these policies will come with fixed premiums for the duration of your life. The cost of these depends on how much you would like to leave behind after you die.
Permanent policies also let you accrue cash value while paying your premium. You can then take out a loan against this during your policy. However, if you don’t pay this back then it will be taken out of the payment your family or friends receive on your death.
What is Term Life Insurance?
Unlike permanent life insurance policies, term life insurance covers you for a certain period of your life. This usually starts from the date that you sign up for the policy.
You can find different terms to suit your needs.
For example, let’s say you’re starting your policy in your thirties so that you can leave some money behind for your children while they’re young. In that case, you’ll want to leave plenty behind for them if you die so you might decide to get insured for $500,000 or more for twenty or thirty years. This will help to cover the cost of schooling, home, and basic living costs if you aren’t around.
After your thirty-year term is up, your children will be grown and will have more independent security. Because of this, you might be happier with a shorter policy with lower premiums.
Going for a term life vs permanent life insurance policy can provide you with more flexibility. However, it will mean that you’ll need to keep an eye on your policy over the years to keep it up to date.
Term Insurance vs Permanent Life Insurance Costs
When doing a term vs permanent life insurance comparison, one of the most important things to think about is cost. After all, you need an insurance policy that suits your budget.
In general, men’s life insurance is more expensive than women’s life insurance, as men have a shorter life expectancy. Life insurance policies are also usually more expensive the later in life that you take them out. For example, it will be more expensive to take out a policy in your sixties than in your forties.
Premium payments for term insurance policies tend to be cheaper than whole life insurance policies. That said, it’s worth remembering that they only cover you for a certain period of your life. Because of this, they may make getting coverage later on more expensive.
For example, for women, signing up for a 20-year policy in your thirties will cost you around $193 per year compared to $2,014 for a permanent policy. In comparison, getting a 20-policy in your sixties will cost around $1,673 per year compared to around $7,000 for a permanent policy.
If you have certain health conditions or a family history of certain illnesses, this may also make your premiums more expensive.
When it comes to term life insurance vs permanent life insurance cash value, permanent policies tend to offer more possibilities for borrowing while you’re still alive.
It’s also worth looking into different premium payment options. Some policies look for annual premium payments, while others take monthly payments instead.
Some policies are also happy for you to pay higher premiums at times that suit you. Let’s take a closer look at how this works.
Finding the Policy to Suit You
Your budget will play a big role in the type of life insurance policy that you choose to sign up for.
Permanent policies come with a bigger price tag but offer more comprehensive cover. So if you’re in a financially stable situation then these are a great option.
However, some policies offer more flexibility on premium rates at different times. Variable policies, for example, let you adjust your life insurance pay-out to suit your budget. So if your finances change you can up- or downgrade your policy to suit your budget.
These policies may also let you pay higher premiums than necessary while you are able to. This means that if your financial situation does suddenly change, you will already be in credit with your insurers. This means you have a buffer for your upcoming premium payments if you need it.
Find the Right Term vs Permanent Life Insurance for You!
When it comes to term vs permanent life insurance, finding the right policy for you depends a lot on your personal situation. If you can afford it, permanent life insurance will give you peace of mind for as long as you need it. However, term and variable plans offer a lot more flexibility if your circumstances change.
For more help finding the right policy for you, get in touch today. We’re happy to help!