Principal, LifeNet Insurance Solutions, Redmond, WA
Each type of life insurance has its' uses. Generally, term insurance is purchase to protect against a premature death. New parents would want as much coverage as affordable but would usually need coverage for a period of time. Permanent coverage is usually more expensive because it is designed to stay in force for the insured's lifetime. For example, permanent coverage is appropriate for final expenses or to pay estate tax.
There are many other uses for each type of coverage. There is no "one size fits all". As a consumer your best bet is to understand your objective and to communicate it clearly to an agent that understands the market.
My interpretation of this question is, "What are the advantages of Permanent Life insurance versus Term?" Some features offered by some permanent life insurance policies, that are not offered by most term policies, are as follows. Keep in mind that the policy itself, and how the transaction is carried out, can affect whether these advantages are realized.
1) Cash value that can be borrowed from in a tax advantaged way, while still retaining the death benefit.
2) Cash value that can be collected if the policy is relinquished.
3) Lifelong protection.
4) Ability to pay the policy in full in a reduced period of time, so that no more premiums are owed.
5) Ability to change the policy to a reduced paid up policy, so that no more premiums are owed.
6) Ability to put sums of money into the policy to grow in a tax advantaged way.
7) No need to renew the policy.
8) Guaranteed level premiums for life.
9) Possible collection of dividends or increasing face amount.
10) Assurance that the policy will be in effect for funeral, burial, estate transfer, estate taxes, and other needs that are permanent in nature.
Manager, Marindependent Insurance Services LLC, California
Peggy and I agree on the real question, however I do not believe in the benefits of permanent insurance perhaps as much as she does. Therefore allow me to point to the benefits of Term Life:
1. Massively affordable. Term Life can often cost just 10% of whole life.
2. A simple understandable policy.
3. Simple shopping for policies. Since Term Life is so simple is much easier to compare coverage from company A to company B.
4. Complete separation of investments and insurance
5. Ability to convert "some" term life plans to permanent at a later time if you should choose to.
6. Protection for only as long as the guaranteed time period. Since most people do not need nor want insurance when they are 70, this is a real plus.
7. Since its cheaper, its much easier to acquire and pay for the real amount of life insurance that you actually need. Some experts claim you need ten times earnings (that may or may not be true, but its as good a number as others.) With a 20 Year Term Life policy, many people can actually afford the $500K in coverage that is required if you make $50K per year.
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There are many other uses for each type of coverage. There is no "one size fits all". As a consumer your best bet is to understand your objective and to communicate it clearly to an agent that understands the market.
1) Cash value that can be borrowed from in a tax advantaged way, while still retaining the death benefit.
2) Cash value that can be collected if the policy is relinquished.
3) Lifelong protection.
4) Ability to pay the policy in full in a reduced period of time, so that no more premiums are owed.
5) Ability to change the policy to a reduced paid up policy, so that no more premiums are owed.
6) Ability to put sums of money into the policy to grow in a tax advantaged way.
7) No need to renew the policy.
8) Guaranteed level premiums for life.
9) Possible collection of dividends or increasing face amount.
10) Assurance that the policy will be in effect for funeral, burial, estate transfer, estate taxes, and other needs that are permanent in nature.
1. Massively affordable. Term Life can often cost just 10% of whole life.
2. A simple understandable policy.
3. Simple shopping for policies. Since Term Life is so simple is much easier to compare coverage from company A to company B.
4. Complete separation of investments and insurance
5. Ability to convert "some" term life plans to permanent at a later time if you should choose to.
6. Protection for only as long as the guaranteed time period. Since most people do not need nor want insurance when they are 70, this is a real plus.
7. Since its cheaper, its much easier to acquire and pay for the real amount of life insurance that you actually need. Some experts claim you need ten times earnings (that may or may not be true, but its as good a number as others.) With a 20 Year Term Life policy, many people can actually afford the $500K in coverage that is required if you make $50K per year.