Term vs Permanent Life Insurance
This question has been asked and answered for so many years I think it dates back to the invention of the wheel. There is no such thing as a single positive answer to this question because everyone’s situation is different in one way shape or form. Keep in mind that life insurance is not a one size fits all form of insurance.
Everyone normally has a reason why they need life insurance and usually they are a little different, everyone’s budget is different and everyone financial liabilities are different and last but not least, their age and health history. This is why there is no single answer to this question. What product is good for one person might not be good for another person. As far as Term, Universal and Whole Life plan designs go, they are all good for the right situation.
Term vs Permanent Life Insurance is a very important question when a consumer wants to apply for a new life insurance policy.
Let’s get the Whole life insurance plan design out of the way first. Many years ago Whole Life insurance was by far the most popular plan with no close second. As the years went by the plan lost popularity with the invention of Term Life insurance and Universal Life because they cost less to purchase. Whole Life is not very popular any more but there still is a time and a place for this plan design.
This is a good product for babies and young children because at the young age the premium would be very low. The policy would be carried with this child for life and the premium would not go up. The child later on in life would have a nice life insurance policy with the considerable cash build up it would produce. This child turning into an adult could either keep the policy in force or if need be take the cash surrender value if he or she so desires. These policies are great when written on a child because of the low premiums.
Term life insurance is an excellent product for the correct time and place.
A Term policy would not be appropriate for a youngster due to the fact there would be no presence of a monetary loss if something happened to this young boy or girl not to mention the Term plan would fall by the wayside when they would be in their 30s. For years I have heard so much controversy on this subject coming from the television and radio talk show people that never sold insurance a day in their life but they claim to be experts on the subject.
One of the oldest comments concerning Term vs. Universal Life or Whole Life which are the two permanent forms of life insurance is “buy term and invest the rest”. Suddenly the controversy was Term was the only way to go and scrap the idea about purchasing a permanent plan design. This philosophy took off like wild fire. Now let’s dig deep and analyze this statement in detail.
Term life insurance vs. permanent life insurance.
Here are some things to remember about term life insurance and keep in mind that I think Term life insurance is an excellent product to consider for the right situation.
1. Term life insurance normally has a lower cost factor for the same face amount vs. Permanent life insurance.
2. Term life insurance is a temporary form of life insurance. If you know exactly how long you will have financial liabilities or if you know exactly how long you are going to live, term will do a great job. Term normally only covers you for up to 30 years and some carriers are planning on dropping their 30 year option.
We know that Term Life insurance is a great life insurance plan design but what are you going to do when the term period expires and you no longer have life insurance? Think about for a while!
Term life can terminate while you still need life insurance coverage.
Don’t even consider the thought of continuing to pay for a Term plan after it expires or taking the conversion option. If your company offers to convert it to Universal Life because normally the premium will be too high to afford. The idea sounds good but the premium would be incredibly high. Keep in mind that Term Life insurance is very profitable for the life insurance companies because they receive many premiums without having to pay out on a claim because the person outlived the term period.
Nobody knows what the future has in store for us, so you need to plan for the unexpected.
Due to the fact we don’t have the convenience of owning a crystal ball to predict what will happen years from now, the future will always remain uncertain and that is what life insurance is all about. We just don’t know what is going to happen in the future. Life insurance shifts the financial loss risk on to the insurance company. Actually this is what all forms of insurance are all about, not just life insurance.
Let’s take a look at Universal Life insurance which is the modern and lowest priced form of permanent life insurance.
1. Universal life insurance will normally cost more for the same face amount as Term. Here is a key point to remember. The new and most competitively priced Universal policies do not invest one penny of your premium into a cash build up. You can still purchase a Universal Life insurance policy with a cash build up feature, but some of the modern plan designs are great because they offer a lower premium without the cash build up feature.
Universal life insurance is designed to protect you for the rest of your life.
2. All the premiums go towards the face amount and that keeps the policy premium down leaving you with a policy that will last the rest of your life.This policy design will not terminate while you are still alive and leave you standing there holding the bag. This is permanent life insurance that will last you the rest of your life. This is the whole point of life insurance, to be able to pay out upon your demise.
The best time to purchase life insurance is when you are young.
The best time to purchase life insurance is right away before you get any older and the quoting rates go up and health conditions arise causing the rates to go higher or possibly you could be considered uninsurable. Health conditions can throw a huge monkey wrench into your life insurance purchasing plans. Take out a few minutes to run our quote engine and compare life insurance quotes in the various rate classes to see how they differ in price. This will give you a good understanding on how life insurance quotes can vary. Our quote engine will show you the best life insurance quotes online available in all 50 states.
Life insurance agents can give you the proper advice you need at no cost.
Here is one of the very best recommendations I give folks when we are on this subject. If you are for example 35 years of age and you want life insurance that will protect you for the rest of your life and naturally you want to keep the price down at the same time, apply for a term policy with a 30 year term period with a higher face amount that will cover the bulk of the financial liabilities and then a Universal Life policy with a much smaller face amount. This plan design will continue to cover you for the rest of your life long after the Term insurance drops off.
The Universal Life insurance plan is a vital companion to have along with Term Life insurance for younger people in their 20s all the way up to their 50s. If you would like to purchase life insurance and you are over 50, a permanent plan is the way to go because Term plans that a carrier would offer you would be very limited in term length in that age group.
You can very easily incorporate Term life insurance and Universal life together.
A good example of combing Term with Universal life would be for example if you need for a $500,000 face amount, apply for a Term plan for $400,000 and a Universal Life plan for $100,000. The majority of your liabilities will be covered by the $400,000 term plan and then after the term period drops off, the person would still have the Universal Life policy for the rest of his life.
This is what I call having the best of both worlds and doing what is right for the client. Another good concept is when you are applying for a Term plan; always apply for the longest term period the carrier will offer you. You can always cancel the plan at any time down the road if for some reason you no longer need it any longer. You will not be able to increase the term period once the policy is in force. You are also not bound by a contract to keep it.
Don’t believe everything you hear on some radio talk shows.
I have discussed this subject with many people who received bad advice from listening to talk and radio shows or magazines and purchased a short term (5, 10 15) period life insurance policy only to find out later after the policy expired that they made a bad move. In many cases it is now too late. When their term insurance expired and they were now without life insurance and could not afford to buy a new life insurance policy at their current age or due to health conditions that arose through the years. The worse situation is to outlive your life insurance still needing it and then cannot being able to afford it. This could change the course of your would be beneficiaries lives.
Run our quote engine and review life insurance quotes from over 40 A+ rated companies.
If you go to our website BestChoiceLifeInsurance.com, you will be able to run our quote engine and see life insurance quotes for over 40 of the highest rated and most competitive life insurance companies. Feel free to contact us 7 days a week for a no obligation custom life insurance quotes and assistance. We can perform a medical pre-screen if you have any medical conditions so there will not be any surprises if and when you apply for your new life insurance policy.
Make sure to do your homework and know what a good choice really is.
Life insurance options are a very serious subject. Make sure you talk to an experienced licensed insurance professional to be able to receive accurate and helpful information from years of experience and not cheap lip service that could prove to be devastating later in life. An insurance agent/broker has an ethical and a legal obligation to give you the correct advice.
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