Term life and permanent life insurance have the same concept – apply for a policy, get approved, and then your loved ones will receive a death benefit. However, there are contrasts that can influence what you choose.
How Does Term Life Work?
Term life insurance lasts 10-30 years. Once your policy expires, your loved ones won’t get the death benefit, and you will not be reimbursed the premiums you paid.
There are ways to get around this:
- Get guaranteed renewal with a Yearly Renewable Term (YRT). Unlike other forms of term life insurance, YRT policies don’t have a policy life limit. You renew annually, but premiums increase as you age
- Convert to a whole life policy by opting for a convertible term policy. Your premiums will be adjusted to be consistent with standard whole life insurance once you convert your policy
- Apply for renewal before policy expiration. However, you may be denied because of age or poor health
Other forms include:
- Level term (death benefit and premium costs are fixed; premium cost is more expensive because this accounts for future rising costs and economic inflation)
- Decreasing term (premium is the same, but the death benefit decreases over time; often purchased to cover outstanding mortgage costs)
How Does Permanent Life Work?
Permanent life insurance doesn’t expire. These policies can be cost-prohibitive for some, as premiums can cost roughly ten times more than term life premiums. Surrendering your policy has the same effect as an expired term life policy – your loved ones won’t get the death benefit.
This form of life insurance is appealing because:
- Some policies offer a cash value component, in which you have a separate savings account you can borrow against
- If you choose universal life, your account can build according to investment sub-accounts (variable universal) or stock market performance (indexed universal)
But not all types offer cash value accumulation. This still holds an advantage for those who have difficulty enrolling due to insurability risk. Individuals can enroll in guaranteed issue whole life policies, which allow applicants to forgo the medical underwriting process.
Final expense insurance is another example. It offers a small death benefit with low premiums. It’s usually purchased to cover funeral expenses, but its death benefit can be used for any purpose.
Which Is Better?
This depends on circumstances and preferences. If you’ve just bought a home, or you’re looking for an inexpensive policy you can hold for a certain period of time, then term life is right for you.
If you’re in need of a policy that will last a lifetime, and you’d like to build savings as you pay premiums, then permanent life insurance may be the better option.
Help Is One Call Away
At Senior Health Solutions, we take your specific circumstances into account before assigning you a policy. Your best choice may be term, or it may be permanent. Whatever the case, you’ll have the best policy for you at the price you deserve. Don’t wait – call us today at (636) 244-4415.
