Do I Need Term or Permanent Life Insurance?

Life insurance is a financial tool to help provide for those you leave behind if something unexpected happens. There are two main types, term and permanent which vary in different ways. How do you decide which is best for you? It depends on your goals.

Term Life is considered to be the most basic type of life insurance, usually available in five year increments from 5 to 30 years. Term life is usually purchased to help cover current and future financial obligations for those who depend on you, or to pay off significant debt. It provides for a death benefit during the policy period only, which makes it an affordable way to provide a financial safety net. When selecting the length of the policy, think about the time frame of the financial obligations (mortgage, college, etc) you want to cover. You usually want the policy to continue until your last major obligation is taken care of. If you die while your term policy is still in effect, your beneficiary will be paid the face value of the policy. If you die after your term policy has expired, there is no payment to anyone.

Permanent life insurance, which includes both whole life and universal life, is different from term insurance. It offers both death benefit protection for your entire life (assuming you continue to pay the premiums) as well as a cash component (considered an investment that you can borrow against) in one policy. So, why doesn’t everyone get permanent life insurance since it covers your entire life? The premiums (what you pay every month) are much higher than term life. Permanent insurance is typically used as a planning tool to cover estate taxes and leave an inheritance.

Still not sure which type of policy is best for you? Read our full article here or login and chat with a coach about your goals.