_edited.png)
What Type of Life Insurance Do I Need?
There are two basic types of life insurance: term life and whole life. Term life provides protection for a defined period of time and is often regarded as the most affordable type of insurance. Permanent life (sometimes known as whole, universal or variable) is priced to provide lifelong protection and may be a more expensive option.
Comparing the Different Types of Life Insurance: Advantages and Disadvantages
The Advantages of Term Life Insurance
-
Term life insurance offers a high level of coverage for the most affordable price.
-
Term life policy premiums are fixed for the life of the policy.
-
Term life insurance is easy to understand and has a simple enrollment process.
-
Policies can be customized with riders to add additional benefits.
The Advantages of Permanent Life Insurance
-
Policies build a cash value in addition to the death benefit. The cash value can be used to pay for premiums, borrowed from to cover unexpected expenses, or help with paying for retirement expenses.
-
Riders can be added to the policy. Riders can allow coverage for other events outside of death and can add additional benefits.
-
The growing cash value and flexible premiums can make permanent life policies an excellent choice for long-term financial planning goals.
The Disadvantages of Term Life Insurance
-
Deciding up front how many years do you need to provide protection for your family. Premiums cost more the older you get so if you need to extend your coverage beyond the term of your existing policy later in life the insurance premiums will be much higher.
-
Policies only last for a fixed term, if you'd like to extend your coverage you may need to reapply and retake the medical exam.
-
As term life policies can be more expensive later in life, permanent life may be a better option for people over 50.
The Disadvantages of Permanent Life Insurance
-
Coverage can be expensive, which can make large coverage sums very costly.
-
Premiums cost more than term life insurance premiums.
-
It costs more to cover needs that will disappear in time, such as mortgages or family income needs for children.