TERM LIFE INSURANCE
Term vs. Permanent. This is the question, that is on the minds of many individuals, who are either in the market for life insurance or have purchased a term policy and are thinking if they made the right choice. There are various scenarios where each type of life insurance applies, based on the different attributes of each type of policy, one type of policy would fit your needs over another.
For example, if you’re a young couple, just starting out in life, purchasing a new home, with many expenses and a limited budget, then a term policy might be your best option, because they’re more affordable then permanent life insurance. And with a term policy, you can get the maximum coverage, at the most reasonable rate, thus covering those major risks, such as a mortgage, income replacement, credit card debt and even children’s expenses. However, term life insurance is less expensive for a reason, it eventually expires. It terminates, basically after 10, 20, or 30 years, and can even expire up to age 100. Also, another disadvantage of term insurance, is that there is no cash value with these kinds of policies.
Term life insurance works like car insurance. The insurance is only active when you need it, and then it terminates. However, term insurance will substantially increase upon renewal, because once a term policy expires, you either have to convert it to permanent (if you’re able to convert it), or buy a new term, more expensive term policy. Because as you age, term insurance rates increase too, so much so, that eventually, term premiums become unaffordable. And that’s why more people choose permanent life insurance, in comparison to term insurance, because permanent insurance is permanent, and the better choice, because it never expires.
BENEFITS OF PERMANENT LIFE INSURANCE
Yes, it is true, that permanent life insurance premiums are more expensive than term premiums. The reason for this is simple. Permanent life insurance rates do not increase, and stay exactly the same for duration of your life, or as long as you keep paying your premiums.
The other advantage of permanent policies, such as Universal Life, or Whole Life, is that part of your premium is always returned to you because it’s invested. Permanent insurance has two parts: one portion of that premium goes to pay for the insurance and the other portion goes into an investment vehicle, as a forced savings plan. The cash portion builds up in the policy and creates an investment cushion, which can then be used towards paying off all the premiums, or alternatively, it can be added on to the death benefit, when the policy is cashed in.
Many clients have confessed, they don’t like wasting money on insurance premiums that expire and then have nothing to show for it. They would much rather invest in a policy that provides a cash value or return of premium option, for their retirement “down the road”.
Another major benefit over term insurance, is that permanent, cannot be cancelled. It does not expire. And even if you’re health declines, or changes, your permanent life insurance will remain intact, as long as, the premiums are paid.
The question is, which plan is right for you? Have questions about Term or Permanent Life Insurance, please contact Mike or Amanda from Platinum Mutual Ltd., at (416) 315 8569 and they would be happy to show you which plan is right for you. Call today!