Term vs. Permanent Life Insurance
To select a life insurance policy is really difficult because it takes lots of research and time to make sure that all the factors are entirely examined before obtaining a life insurance policy. Actually, there are two kinds of life insurance plans to choose from which include permanent life insurance and term life insurance. To get a better deal you have to search and understand all the concepts of both these insurance policies.
Term life insurance is almost like leasing your vehicle where-in you just buy life insurance for a particular period of time however as the duration gets over so does the insurance coverage. By the way, permanent life insurance is almost like purchasing a vehicle where-in you purchase a life insurance policy which is not for a specific period and remains until the death.
Term Life Insurance
People generally choose term life insurance since it is very cheap. This particular life insurance policy covers the insured person for a specific period where-in a particular amount of premium is being paid every month. But when the insured person does not renew the insurance policy then it lapses where-in you will have no-residual value and even the insurance coverage. To renew the term life insurance is very easy because it does not require medical examination.
So, life insurance coverage of this kind is very easy if you obtain health problems later. There are different kinds of term life insurance which includes convertible life insurance policy and decreasing life insurance policy. The convertible life insurance policy is a permanent policy which is obtained without any medical examination while the decreasing policy normally pays the death benefit.
Advantages of Term Life Insurance
- This type of life insurance policy is cheap and can just cost less than the permanent life insurance.
- This type of life insurance policy does not have any strings. If you would like to get more coverage then you can easily convert this insurance coverage to the permanent life insurance coverage.
Disadvantages of Term Life Insurance
- This type of life insurance policy just provides insurance coverage. There are no cash values and no rewards included in this coverage.
- You can at any time stop paying premiums however thereafter you cannot choose other life insurance coverage later-on.
- The term price in this kind of coverage increases rapidly as the insured person gets older.
Permanent Life Insurance
Permanent life insurance policy normally covers the insured person for his or her entire life. The coverage gains cash value with each monthly premium. In case the cash value gets higher then it can be utilized for financing the premium as it allows the insured person to retain his or her policy for a longer period. However, the cash value can be regulated after the retirement. This particular practice is known as the life settlement. Permanent life insurance is also referred to as whole life insurance policy however, it is slightly different.
Permanent life insurance can be divided into two which include universal and variable life insurance. Universal life insurance enables the flexibility of modifying the death benefit however some changes need medical examination for verifying the insurability of the insured person. The variable life insurance usually invests the premiums of the insured person in assets like binds and stocks. It even carries the possibilities for lower and higher returns on the investment made compared to the whole life insurance policy.
Advantages of Permanent Life Insurance
- This type of life insurance accumulates in cash value and even savings. Cash value that is being received will usually be tax deferred.
- In this type of life insurance policy there are no risks involved. After the death of the insured person, his or her family members will benefit compared to term life insurance where the insurance coverage is paid if the dead person was insured at the time of his or her death.
- The cash value received through this type of insurance can be used to pay college fees or to purchase a vehicle. This can be done without even receiving any penalties.
Disadvantages of Permanent Life Insurance
- Cost is one of the biggest disadvantages in permanent life insurance policy. This kind of insurance policy may cost you a big deal compared to the term insurance.
- In case you fail to pay the premium on this kind of insurance policy, you will have to pay large amount of penalty.
Term against Permanent – (Renting against Purchasing)
When you decide between the term life insurance and permanent life insurance, it is better to think from the purchasing or renting point of view. If you take term life insurance, it is like leasing an apartment where-in you have to pay some amount every month. The payments regarding the rent is less compared to the mortgage loan however once you move-out from the apartment you have nothing with you to show off.
By the way, permanent is almost like purchasing a house where-in you build cash value slowly at the beginning and rapidly later. Among the seniors term life insurance is quite popular because they cannot hold permanent life insurance for a longer period to gain excellent returns. This is why permanent life insurance is generally famous among the parents who like to offer their children great future.