Term or Permanent? Which Life Insurance is Right for You?

If you are young, chances are that the subject of life insurance has probably never even crossed your mind. Nevertheless, dying is as much a part of life as having kids or working for a living, and as people become older, having a life insurance policy makes more and more sense.

If you are independently wealthy or have spent your life making sound investments and can provide an income for your dependents through them after your demise, you probably do not really need life insurance. If on the other hand, you have a family and are their main source of income, or the assets you own don?t cover your debts, life insurance can be a sound investment.

A life insurance policy could mean the difference between your family struggling for an income or receiving an income from your estate and having all of your debts paid off in the event of your demise.

Insurance companies offer two principal types of life insurance policies, term and permanent or ?cash value? insurance. We will examine the two types of policies to determine which type of policy would best suit your needs.

Term insurance consists of a policy which will pay out a specified amount of money if you die within a certain ?term?, which could be 10, 20 or even 30 years. This type of insurance will not accrue cash while you are alive and is designed to give your dependants financial support until the mortgage on your house is paid off so you can then depend on your assets and other investments to be self insured.

An important feature of term insurance is that it can often be renewed or converted to a permanent policy. Many insurers will allow the client to renew their policy without a new medical examination and often offer the policyholder the option of converting to a permanent policy for a higher premium.

Switching to a permanent policy makes sense if you have reached the age of 65 and not yet acquired sufficient assets to self insure, otherwise, most people stick to term life insurance.

Also known as ?cash value? insurance, these policies command much higher premiums than term insurance. This is because the additional premium amount accrues as savings and interest over the life of the policy.

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Source: http://www.investorguide.com/article/9595/term-or-permanent-which-life-insurance-is-right-for-you/

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