| Term insurance and permanent insurance are two basic types of life
insurance. Term life insurance is temporary, and it covers only a
specific period of time called the relevant term. Permanent life
insurance is the type of insurance where the policy is for the life of
the insured and the payout is assured at the end of the policy. Term
life insurance builds on cash value while permanent life insurance
accrues cash value.
Now let's look at the pros and cons for term life insurance and
permanent life insurance.
Term insurance has two advantages. First, its initial premiums are
usually lower than the initial premiums of permanent insurance.
Secondly, term insurance is better for covering needs such as loans or
mortgages, which will disappear in time.
There are a few disadvantages in term life insurance: Coverage might
become too expensive to keep or terminate at the end of the term. Also,
the premiums increase with ages. Besides, paid-up insurance and cash
value are usually not offered.
The advantages of permanent insurance are as follow: You get a
guaranteed protection for life as long as you have paid the premiums.
Secondly, a cash value is accumulated with the policy and you can borrow
from it. Thirdly, you can choose to set the premium costs whether fixed
or flexible depending on your needs. Besides, a permanent insurance
policy's cash value can be surrendered for cash value. In addition, you
can add a provision to the policy for the option of purchasing
additional insurance without having to providing evidence of
insurability.
There are a couple of disadvantages in permanent life insurance.
First of all, the required premium levels might make buying enough
protection harder. Also, if not kept long enough, permanent life
insurance might be more costly than term life insurance.
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