Term Vs. Permanent There are many different types of life insurance, but two of the most popular categories are term and permanent insurance. Both, term and permanent, have their advantages and disadvantages. Term insurance is commonly referred to the simplest form of life insurance. Term insurance is cheaper and at times easier to acquire due to less extensive medical examinations. It is good for when large amounts of insurance coverage is needed in a shorter term.
This can be widely used to cover business liabilities because some loan terms require a person to have enough insurance to cover the loan balance in case of death. Ten and twenty year terms are the most popular, but recently a thirty year term has become available. The monthly costs are less expensive, therefore available to those who have a need for insurance but a lack of resources. Although term insurance has its benefits, it also has its downfalls. Once the term limits are over, the insurance, benefits, and all paid premiums are gone. There is no savings element to term because the money one puts into the 'bucket' is simply enough to cover the insurance itself.
There is no built in savings or interest benefits. One problem many people do not take into consideration with term insurance, is that once the insurance expires, replacement coverage of the same price is non-existent. This is because one's age has increased along with insurability. Many people view term insurance as a short-term solution to a long-term need. On the other hand, there is permanent insurance. Permanent insurance provides lifetime protection.
One gets what they pay for. Permanent insurance premiums are considerably more expensive. The extra expense is offset somewhat by the savings function the insurance provides. Permanent insurance carries a cash value throughout its life that can be used if needed. Once one gets this insurance, it cannot be taken away, even if a life threatening illness sets in. Permanent insurance cannot be a loss, it will pay one way or another, be it by payment upon death or when the policy matures.
This is the best way to know that the insurance one purchases will always be there, assuming one keeps paying the premiums, and there will be no surprises due to increased premiums because they will remain the same throughout one's life. On the downside of permanent insurance, it is more costly than term. The required monthly premiums are hard for some people to make, and they are not worth the money if the person does not keep it for an extended amount of time. There are advantages and disadvantages of both term and permanent insurance. Financial conditions, intended uses of insurance, and long-term insurance goals must be considered when determining which type to purchase.