The decision to buy life insurance is important especially if you have loved ones that depend on you financially. When you start your life insurance shopping journey, you will find that there are two types: term and permanent.
It’s important to educate yourself on the differences between the term and permanent life insurance before making a decision. Term life insurance is temporary coverage that provides a financial safety net for your family; typically 10, 15, 20, 25 or 30 years. Permanent life insurance provides coverage for your entire life and includes added features. Term insurance is often a good fit for young families because of the financial pressure they carry. When you are starting a family, you may also be buying a home, starting your retirement plan, purchasing a new vehicle all while raising your children. This is a time in your life when you are carrying the largest amount of debt and not yet in the high of your career with a salary to match. Term insurance becomes a good choice because of its affordability and simplicity.
Term life insurance is affordable.
Because term insurance is simple; designed to only provide coverage for a defined number of years, and pays out if you die during that period it carries less risk than permanent life insurance and is more affordable. Term life is used for income replacement for your loved ones if you die. Permanent life provides lifelong coverage with a variety of extra features such as “cash values” which makes this type of insurance more expensive. Permanent life insurance is a great option if you are wealthy or are close to retirement.
In our How Much Does Life Insurance Cost? blog post, we discuss and give examples of costs of permanent life insurance and term life insurance. Yes, permanent life products are more expensive, but if you feel they would fit your situation better than term we are happy to discuss permanent products with you. There are many different policies available and they vary greatly from one product to the next
With term insurance you choose a term length to fit your needs.
Every family has different lifestyles and financial situations. Term insurance is customizable when it comes to the length of time you need coverage. You can get varying lengths of coverage between five and thirty years.
When deciding the length of your term, you should consider what your financial obligations include. Think about your income, debts, support for your spouse and children and household expenses. Choose a term to cover the years when your family will need the most support. If you have a 30-year mortgage or young children to support through college, then you might want to choose a 25 or 30 year term.
Term life insurance is easy to understand.
Term policies are fairly simple; the policy pays out to your beneficiary or beneficiaries of choice if you die while your policy is in force. If you don’t die while your policy is in force, your coverage expires. Permanent life insurance policies are more complex with the added details of investment components and have many ways to customize your policy based on your goals. That being said, everyone has different financial goals, and yours may align with a permanent product. It’s important to review your financial situation with a professional before purchasing a permanent policy.
Term insurance quotes are available online and easy to do yourself.
Because of the simplicity that term life insurance offers, it’s easy to compare quotes online from multiple insurance carriers. You can choose a coverage that fits your needs from the comfort of your couch (even in your pjs) if you prefer.
Term insurance can be converted to permanent.
What’s great about term life insurance is that most term policies can be converted to a permanent life insurance policy. As you age, your lifestyle, finances and life insurance needs change. Term insurance might be a perfect fit for you right now, but later in life you may prefer a permanent policy. If you like the idea of converting your policy, make sure that converting is an option with your term policy before you buy as not all policies have this option. Because some carriers have expiration dates on conversions, you need to keep track of that deadline and keep in mind that you will need time for processing the paperwork. Most carriers do not have grace periods for conversions.
Deciding you need life insurance is the first step. At Quotacy we can help you decide what type of policy fits your lifestyle best. If you’re interested in term life insurance, you can get instant pricing with our do-it-yourself quoting tool without providing any personal information. If you want to learn more about permanent life insurance, we have staff with years of experience putting permanent products in force as well. Contact us and we can assist you with any questions you may have about life insurance.