All life insurance policies are one of two fundamental types: term insurance or permanent insurance. Both are appropriate for different needs situations.
Term life insurance is cost-effective. It is designed to provide you with affordable insurance protection for a set period of time, usually 10 or 20 years. If you die while coverage is in effect, your beneficiaries receive your cash value benefit amount tax-free, to use any way they wish.
Term life insurance is best for you if you have no estate planning issues and therefore are unconcerned about life insurance cash value benefit to pay estate taxes; or if you need a large amount of money for a short period of time, for example, you need a large amount of money to pay off mortgage or student loan; or if you lack the financial resources to purchase adequate permanent insurance.
When the term is over, you may have the option to renew the policy, or exchange a Term 10 policy for a Term 20 policy, or convert to a permanent life insurance policy, without providing additional medical evidence.
Since term life insurance coverage is for a set period of time and not for life, the initial premiums are often lower than the permanent insurance premiums.
Permanent life insurance insures for life. When you have a permanent life policy, you know you are insured for as long as you live, throughout your lifetime. If you have estate planning issues, or you are investment-oriented, then permanent life insurance is best for you.
Premiums for permanent insurance are considerably more expensive than for an equivalent face amount of term insurance. Premiums will be considerably lower when the life insured is younger because premiums are received over a longer period, and the insurer’s cost of the death benefit is amortized over a greater number of years.
Let me give you an example to help you better understand the difference of premium between term life insurance and permanent life insurance.
Mike, male, age 35, optimum non-smoker, coverage amount: $1,000,000
Term 10 life insurance monthly premium: $31.77 per month
Permanent life insurance monthly premium: $497.00 per month
Now you have seen the big difference of premium? That’s mainly because Term 10 life insurance only protects you for 10 years, while permanent life insurance protects you throughout your lifetime.
Yan Li 李 燕
(Yan Li, 李燕，President of Canada Valuelife Financial Services Corporation; Registered Teacher and Licensed Insurance Advisor in Ontario Canada; President Award Winner; Author; Translator; Value Life Coach. Tel: 416-388-6484. Email: yan@find-the-value-in-life.com. Website: www.find-the-value-in-life.com)
P.S.: Join our mailing list for more upcoming Value Life news!