When choosing life insurance, one of the common questions you may have is “what kind of insurance should I choose“? To help you decide between both, we provide you some guidance to choose the best option for your situation. Here are 5 tips to decide between term and permanent life insurance:
How Flexible Do You Want to Be?
Term life insurance offers more flexibility and adaptability to the policyholder than permanent life insurance. Because the premiums are smaller, you have more opportunities to access your money and use it as you want. If down the road you decide that permanent life insurance is better suited to your lifestyle, you can always convert your term one to that, but it doesn’t work the other way around.
How Risky Are You?
When the “term” on your life insurance ends, you are up for a renewal if you want it. However, at that point in your life, you might find that due to the state of your health, the cost of living, and other conditions, the premiums much higher than what you had before. Permanent life insurance is more expensive at the beginning, but you pay the same premiums for the length of your life, so no sharp increases later on.
Do You Like Bundling?
Who else likes “bundles”? It’s so convenient when the same operator or company offers you multiple services. One bill, one number to call if something is up, and usually a discount to boot. Consider permanent life insurance like a “bundle”. You get life insurance and an investment component that you can control and borrow against if needed. Term life insurance is like getting one product and then picking up a different product or service, in this case investments, somewhere else. More choice, but it could end up being more of a hassle.
Are You Intentional About Saving?
If you already have a saving strategy for the future, then term life insurance could be a good option for you. Due to the smaller premiums, you can afford to put money away in whatever way you please. However, there are people who wish they were saving but don’t have the discipline to do it. Permanent life insurance might be a good option for them because it automatically comes with a cash value savings component which grows during the length of your policy. This way they will be saving automatically without giving it second thought and they can even borrow against it penalty-free for certain circumstances.
Is Tax-free Savings Something that Appeals to You?
Some people are interested in ways to keep their savings tax-free. Once you have a certain level of income and have moved the maximum amounts of money into other tax-free saving initiatives like retirement and education funds, the savings component of permanent life insurance might appeal to you. The cash value that accumulates as you continue to pay into it and invest it is tax-free, giving you an additional place in which you can allocate income. If you haven’t maxed out your other traditional tax-free savings accounts, an option is to go with term insurance and then contribute to those funds first.
These 5 tips to help you decide between term and permanent life insurance. If you are looking to compare the rates for different kinds of life insurance, try using a handy online calculator that will compare life insurance premiums. Just input the essential information in confidence, and quickly get the essential numbers you were looking for.
When you take time to navigate the choices, you will become more comfortable with your final decision and have a higher level of satisfaction with your final product.