In short, it depends on the need.
Term insurance is ideal for short term protection (e.g. paying off a mortgage or providing income in the event of an early or unexpected death). Permanent insurance is ideal for long-term safety net protection, estate planning, retirement planning. Many people buy both types of coverage to create a combination of benefits – some permanent to protect against the future after other debts are paid off and some term to cover time-limited debts (such as a mortgage, car, etc.). Term insurance provides more bang-for-your-buck up front, but it’s only for a short period. Permanent insurance allows you to pay the same premium for the rest of your life without having to worry about it going up in the future.
A brief description of the two types of coverage are as follows:
Term life insurance guarantees the premiums will remain fixed for a specific number of years (10, 15, 20, 25, or 30 years). Once the initial period of premium guarantee expires, the program changes to either annual renewable term insurance with premiums increasing each year (based on age) or the premiums remain the same and the death benefit decreases each year (this structure can be seen on term insurance that is featured on a universal life chassis. There is no cash value build-up in term insurance.
Permanent life insurance is designed to provide coverage for the rest of the insured’s life and build cash value. Under a guaranteed universal life (GUL) program, the policy can be structured to keep premiums level and provide coverage up to a specified age (e.g. to age 90, to age 100, or even up to age 121) under the “dial down” process. Whole life features level premiums and death benefits and builds cash value at a faster rate (participating WL policies may pay dividends that can be used to increase the death benefit or decrease the premiums over time – non-participating WL policies do not feature this ability) – the trade off between this and guaranteed universal life is that to increase the cash value faster, the premiums will generally be substantially higher. For both GUL and WL, the carrier takes back the cash value upon the death of the insured, and pays out the death benefit proceeds. Therefore, GUL policies allow you to maximize your death benefit and minimize your premium dollars that you pay for the coverage.
There are many advantages to both types of coverage. Give us a call today at 1-888-972-0024 to review your life insurance program. Even if you currently have life insurance, you may want to review your coverage to see if a lower rate or better guarantee is available – the quotes are provided at no cost to you and we do not charge any fees for our services.