The question of Term life insurance vs. Permanent life insurance has been asked and answered for so many years, sometimes I believe it dates back all the way to the invention of the wheel. There is no actual single 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 can vary to the extremes.
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 depending on your specific needs and budget. Let’s dig into this deeper and find out what this is all about so you can make a smart life insurance buying decision and put this question to rest, once and for all.
My personal viewpoint on this subject is to simply blend the two products together in one package and then you have the most perfect life insurance portfolio possible at the lowest cost factor, but don’t quit reading yet, keep on reading along and we will get into more detail on this interesting subject so many people ponder upon.
Purchasing Term or Permanent Life Insurance is a very important question when a consumer wants to apply for life insurance.
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. It was named “Whole Life” because it would last the whole and full life of the insured. As the years went by the plan lost popularity with the invention of Term Life insurance and Universal Life because they cost far 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 can be 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 can be effective when written on a young child because of the low premiums. Whole life insurance for adults is usually far too expensive to be considered cost effective when compared to your other options.
Term life insurance is an excellent product especially for the time in your life when your financial liabilities are at their highest point.
A Term life insurance policy would not be the most appropriate plan design 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 or 40s. Term life insurance as great a product as it is would usually not be applicable for a young child due to the fact that Term life insurance is a temporary form of life insurance and would normally expire when the child is middle aged or less and this would become a serious problem for most people.
One of the oldest comments concerning low cost Term 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 and see how correct it really is.
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 considering 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 moment. Term life insurance is covertible because you can convert the Term policy into a Universal Life policy starting at a specific point in time which would now become a policy for life. The only drawback could be the premium becoming to high to be able to comfortably afford.
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. The new premium after the initial guaranteed term period would be far to expensive for the majority of the people to be able to afford. If your company offers to convert it to Universal Life that is fine, go ahead and do it if it is your only choice. 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. Better planning on your life insurance portfolio would eliminate many of these kind of problems from occurring, but we will get into this a little later in this article.
Nobody knows what the future has in store, so you need to plan for the unexpected so you don’t have any hurdles to cross down the road.
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 years to come. Life insurance shifts the possiblility of a financial loss to the insurance companies. 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 most 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 about the modern up to date Universal Life policies. 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 existing in the policy like Whole Life does.
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 an empty 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 and financially protect your family members.
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 rates can vary. Our quote engine will show you the best life insurance quotes online available in all 50 states.
Life insurance agents and brokers can give you the proper advice you need at absolutely no cost what so ever.
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 life insurance buyer. 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 at all for that matter.
Don’t believe everything you hear on TV and Radio.
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 families lives.
Make sure to do your homework and know what the best choice is for you.
The different type of life insurance options are very important to understand. This can make the difference of purchasing a well designed life insurance portfolio that will perform well for your specific needs to purchasing life insurance that will turn into a total disaster putting your dependents in financial harms way if something happens to you and your income stops flowing in. Don’t hesitate to call us toll free 7 days a week with any questions you may have. Thank you for visiting our website and taking the time to read this article. Take a moment to visit out About Us page to learn more about us and our business.