Life insurance policies can purchased under both term and permanent options. Differences between the two indicate that consumers should educate themselves before making a decision. A few basic guidelines are offered below.
Term Life Insurance
Term life insurance is so named because it is only valid for a specific amount of time. For example, Freedom Life Insurance may offer a policy with a 20-year term. The customer would pay monthly premiums with the expectation of a payout of benefits in the event of his or her death within those 20 years.
Freedom Life Insurance recommends a term policy under the following conditions:
Life insurance is only needed for a specific amount of time.The budget for insurance is limited.
- Life insurance is only needed for a specific amount of time. Term life allows consumers to match their insurance needs with an anticipated amount of time. A good example would be parents who want life insurance only until their children reach adulthood.
- The budget for insurance is limited. Because term life only pays benefits within a limited time frame, premiums tend to be less costly compared to permanent insurance.
It is possible to purchase a convertible policy that transitions from term life to permanent life. This is a good option for consumers who start with a limited budget but anticipate having more money to invest later on.
Permanent Life Insurance
Permanent life insurance comes in many forms including whole life and variable life. They all have one thing in common: benefits are not limited to a specific period of time. Once a policy is purchased, benefits are guaranteed for life.
Freedom life insurance recommends a permanent policy under the following conditions:
The consumer wants life long insurance protection.Insurance will be used as an investment tool.
- The consumer wants life long insurance protection. All forms of permanent life insurance guarantee benefits regardless of when the purchaser dies.
- Insurance will be used as an investment tool. Most forms of permanent life insurance serve double duty as investment tools. Premium payments add to policy value as the issuer invests those payments in order to generate returns.
Consumers should be aware that premiums for permanent policies are more expensive compared to term policies. The upside is that premium payments have an end date. Once a policy is paid in full, the consumer no longer pays into it.