Choosing Between Term and Permanent Life Insurance Policies

Deciding on which type of life insurance policy to purchase can be pretty confusing, especially if you’re new to this kind of insurance. However, if you just learn about the characteristics of these life insurance plans, you will be able to choose the right one for you.

Basically there are two most common types of life insurance policies, Term Life Insurance and Permanent Life Insurance. Lets take a look at each of these policies’ characteristics so you can determine which is best for you.

Term Life Insurance

This type of life insurance only provides coverage in certain period of time. Therefore death benefits can only be achieved in case the insured individual dies within the period specified in the policy. Due to this arrangement, usually term life insurance policies are cheaper than permanent life insurance policies.

There are basically two kinds of term life insurance policy in regards to death benefit; level term and decreasing term. Level term, which is the more popular type, pays the same amount of death benefit no matter when the death happens during the term. While in decreasing term, the amount of death benefit will decrease throughout the policy’s duration.

Common types of level term policies can last from one year to 30 years, and mostly these policies are renewable. However, you still have to go through a medical exam, and probably there will be an increased in your premium.

Permanent Life Insurance

Just as the name implies, it’s the type of life insurance that will provide you with permanent coverage. The beneficiaries will get the death benefit whether the insured individual died 5 minutes after signing the policy or 50 years later.

Permanent life insurance policy is somewhat more appealing to most people because it has the ability to grow tax deferred in certain period of time, so this type of policy also has cash value and could offer additional benefits to the policyholder as well as his/her family.

This is the characteristic that makes permanent life insurance is more expensive than term life insurance, so it might not be very suitable for most young adults or people with limited income. However, some term life insurance can be converted to permanent life insurance, so if you’re planning to have a permanent life insurance in the future, check with your insurance provider to make sure that your term life insurance policy can be converted.
Choosing Between Term and Permanent Life Insurance Policies Choosing Between Term and Permanent Life Insurance Policies Reviewed by Admin on June 22, 2019 Rating: 5

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