There are two types of life insurance, term and permanent. Term insurance can provide low-cost coverage for a specific period of time (the “term”)—most likely during an individual’s peak earning years when death can cause the greatest financial hardship. Generally the most affordable type of insurance when initially purchased, term insurance is designed to meet temporary needs. It provides protection for a specific period of time (the “term”) and generally pays a benefit only if the insured dies during the term. This type of insurance often makes sense when someone has a need for coverage that will disappear at a specific point in time. For instance, they may decide coverage is only needed until children graduate from college or a particular debt is paid off, such as a mortgage.
If someone buys a term policy and then later realizes they still have a need for life insurance, they can either renew the term policy or (depending on the insurance policy’s rules about conversion) convert it to a different type of policy. If, in 10, 15 or 20 years someone is still healthy according to the company’s standards, they might re-qualify at a reasonable rate. But if their health has deteriorated, they may find that it’s too expensive to renew the policy or may not even re-qualify.
So, when considering a term policy, be sure to carefully consider your needs and how they may evolve, financially, down the road. If your needs will remain temporary, then term insurance may be right for you. But, if you think there’s a possibility that you might need the coverage for a long time, then remember that renewing your term policy after it expires or buying a new term policy at that time, may make coverage more expensive due to your age, health status or other factors.
Unlike term insurance, which addresses more temporary needs, permanent life insurance is designed to provide life-long financial protection. Because permanent life insurance policies are designed and priced to keep over a long period of time, this may be the right type of insurance for you if you have a long-term need for life insurance coverage. Permanent insurance is generally a catchall phrase for a wide variety of life insurance products many of which include a cash-value feature. Within this class of life insurance, there are many different products, including whole life, universal life insurance and indexed universal life insurance.
Despite what many people may think, the need for life insurance often remains long after the kids have graduated college or the mortgage has been paid off. If you died, your spouse would still be faced with daily living expenses. And if your spouse outlives you by 10, 20 or even 30 years—would your spouse be able to maintain the lifestyle you worked so hard to achieve, without the death benefit of life insurance? Would you be able to pass an inheritance on to your children or grandchildren? These are questions to consider carefully when determining what type of life insurance fits your needs. There are a lot of opinions about what type of life insurance you should purchase, but after people do the research, they see the value in both term and permanent and frequently have a combination of the two.
If you need help discussing your situation for life insurance, you can contact me directly at email@example.com or (877) 977-0157