When you purchase life insurance, you have a variety of choices to make.  One of the most difficult decisions buyers face is weighing the costs of whole life versus term insurance or universal life versus term life insurance.  You can buy term insurance, permanent insurance (i.e. whole life or universal life), or a combination of both.  While there are many types of programs, the basics include a consideration of whether you want the coverage for a shorter period of time or guaranteed for life.  Term insurance can be thought of as “renting” your coverage, while permanent insurance can be thought of as “owning” your coverage.

  • Term insurance means you purchase the desired amount of coverage for a selected period of time as pure death protection – once the period of time selected expires, the premiums increase substantially (based on your age),  usually to a level that you would never want to pay.  You can select an initial period with premiums fixed and guaranteed for 10, 15, 20, 25, or 30 years.

Some term insurance policies have been designed to return all of your premiums paid at the end of the period of guarantee selected.  This Return of Premium Life Insurance program has a higher premium than other term insurance policies, but features a cash value that is guaranteed to be equal to the total premiums paid at the end of the term.

Permanent policies are designed to guarantee benefits for the rest of your life.  While they may include a cash value which accumulates over time, the more important element is to guarantee the death benefit to ensure the income-tax-free proceeds are paid immediately to the designated beneficiary.

  • Whole life is one type of permanent insurance.  The carrier guarantees that the premiums will never change, and dividends may be paid to enhance the benefits generated through the program.  The policies feature a guaranteed cash value, and any dividends paid can further increase the cash value or increase the total death benefit.


  • Universal life is another type of permanent insurance.  The premiums are generally much, much less than the premiums required for whole life, and the cash value accumulations are subject to the impact of mortality charges (cost of insurance) and the interest credited to the policy each year.  Through secondary guarantees offered by the carriers (also known as a “no lapse guarantee” or “coverage protection rider”), the death benefits remain guaranteed for life, regardless of the cash value.  You can purchase a policy with a much higher death benefit than a whole life policy for the same premium.

Many people consider a combination of term insurance and permanent benefits.  The permanent benefits act as a safety net for future needs.  If you plan to accumulate a certain amount of cash for retirement, and the market fails dramatically (as we have seen over the last few years), how do you replace the monies you just lost?  If your health begins to break down, and you start spending what you thought you were going to keep for retirement, how do you replace the monies you just spent?

In short, determine how much coverage you need, how long you want to keep the coverage, and design the type of benefits to be selected accordingly.  Term insurance offers the lowest temporary cost, and permanent coverage offers the lowest long-term cost.  Term Insurance Brokers is happy to provide assistance in helping you to create the best overall package to meet your needs and answer any questions you may have.

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