What Are The Benefits Of Permanent Life Insurance Vs Term?
When it comes to life insurance, there are two main types of policies: term life insurance and permanent life insurance. While both offer benefits, there are key differences between the two.
Term Life Insurance
Term life insurance is temporary and lasts for a specific period of time, usually between one and 30 years or until a certain age. Term policies offer a death benefit only if the insured person dies during the coverage term. If the insured person is still alive when the term expires, no refund of premiums will be made. However, some term policies offer a return of premium (ROP) option, where premiums will be refunded at the end of the term if the insured person is still living. Term policies do not carry any cash value, and premiums generally stay level throughout the term.
Below is a table comparing the monthly costs of term life insurance policies for a 35-year-old female and male for a 20-year term with $1 million in coverage:
| Company | Female Monthly Cost | Male Monthly Cost |
|---|---|---|
| Company 1 | $XX.XX | $XX.XX |
| Company 2 | $XX.XX | $XX.XX |
| Company 3 | $XX.XX | $XX.XX |
Permanent Life Insurance
Permanent life insurance, on the other hand, lasts for as long as you live, as long as premiums are paid. Premiums generally stay level throughout your life, and death benefits are guaranteed, meaning they will be paid regardless of when the insured person dies. Permanent life insurance also carries a savings or investment component, called cash value, which grows tax-deferred over time and may be withdrawn or borrowed against while you’re still alive. However, doing so can decrease the amount of the policy’s death benefit if those funds aren’t repaid.
Below are some types of permanent life insurance policies:
| Policy Type |
|---|
| Whole Life Insurance |
| Universal Life Insurance |
Permanent life insurance policies are generally more expensive than term policies due to the cash value component. However, they offer lifelong coverage and a savings component.
Ultimately, the type of life insurance policy you choose depends on your individual needs and circumstances. Before purchasing a policy, it’s important to evaluate your financial situation and speak with a financial advisor or insurance agent to determine the best option for you.
