You sure must have come across the term permanent and term life insurance premium at one point or the other. But, there are chances you do not totally understand the concept. Well, that is not a problem. In fact, this is why we have written this article.
In this article, we will discuss explicitly all about term and permanent insurance policies, the differences and every other important thing you need to know.
Term and Permanent life insurance
Term and Permanent insurance are two major types of life insurance policies. Basically, term life insurance lasts for a pre-set period of time. On the other hand, permanent life insurance as the name implies lasts for your entire lifetime.
You can decide to go for any of these two depending on what you want and can afford. If you can afford the lifelong protection and cash value of the permanent life insurance policy, go for it. And, If what you can afford is the term life insurance which covers mostly mortgage and temporary needs, go for it.
Now that you know what these two terms are and how they function, it is important to know the differences. This will better help you understand, and make a decision about which of these insurance policy to go for.
What are the differences between term and permanent life insurance policies?
Here are some of the key differences between term and permanent life insurance policies:
- Length of Coverage:
Term life insurance coverage usually lasts for a duration of 1-30 years. They design it this way for flexibility. On the other hand, permanent insurance includes a whole life coverage. This coverage will on place so far the policy is in force.
- Cost of Premium:
It is a popular belief that term life insurance premiums are lower to permanent insurance. This is not totally true, because term life insurance premium increase upon each renewal. While permanent life insurance remains the same.
- Cash Value:
With the majority of permanent life insurance, there is a savings component. This we know as cash value, and what this means is that the longer you pay into your policy, the more the case value grows. Term insurance does not have this feature, so you do not get this in your insurance agreement.
- Death benefit:
The majority, if not all life insurance policies pays a death benefit. This is upon the death of the insured provided the policy has not expired and in good standing.
- Convertibility:
Term life insurance policy can be converted into permanent. But, you cannot convert a permanent life insurance policy into term. So, if you have a term life insurance policy you can convert it into permanent life insurance to enjoy the loaded perks and benefits.
Which is best, Term or Permanent life Insurance?
As we have stated earlier, this depends on what you want and can afford. If your concern is affordability, then you can go for term life insurance policy. This is because it starts with the lowest monthly premium. On the other hand, if you are looking for a lifelong solution for you and your family, then the permanent life insurance is your sure bet.
Conclusion:
Term and permanent insurance are the two major types of life insurance policies. They have several differences in terms of their duration, affordability, and many more. We believe this article has been able to do justice to the differences between these policies.