The debate continues on: term life insurance or permanent life insurance? Both have their pros and their cons; it’s just a matter of figuring out what works best for you.
Term life insurance is designed for people who do not have the means to purchase permanent insurance or who only need coverage for a specific amount of time. Term insurance has a guaranteed death benefit if you pass away during the specific time frames in your policy. Should you pass away after your policy expires, the death benefit will not be paid to your beneficiaries. In addition, term premiums will increase at predetermined intervals (from 10 – 30 year initial term periods). Many people buy term insurance when they are young because, compared to permanent insurance, it seems like the more economical choice. But as the years go on the price rises and rises. A low premium now does not mean a low premium in the future. You also run the risk of outliving your term policy and not being able to qualify for new coverage due to age or health factors.
Permanent life insurance provides lifelong coverage–as long as you pay your premiums, of course. While the premiums are initially higher than those of term insurance, it can actually be less expensive. Most permanent policies are eligible for dividends from their carrier, should there be any. Remember, dividends are not guaranteed. Should you be fortunate enough to receive a dividend, it can be put towards your premium payment. Also, some permanent insurance policies allow you to purchase more insurance without regard to your current health. Unlike term insurance, permanent insurance builds cash value and can be used for future expenses, such a paying for your child’s education or purchasing a home. However, if you do borrow cash values from your policy, you reduce the amount and reduce your death benefit.
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