Permanent vs. Term Life Insurance
Life insurance is a purchase an individual makes when he has others who depend on him for financial support. Because in the event of an individual’s death, the people will no longer earn the resources a loved one or close relatives is counting upon, a life insurance plan provides reassurance to the policyholder that his close relatives will be cared for. There are two chief types of policies: permanent and term life insurance.
One of the differences between permanent life insurance and life insurance plan is the time frame by which each continues. Term is purchased for a designated time frame ranging anywhere from one to 35 years. Permanent life insurance can last for the duration of a people’s life; if rates are regularly paid, the money will pay out upon a individual’s death.
The payment for term life insurance policy is good for the stated value of the plan. For example, if a people purchases $100,000 worth of life insurance and he passes away while the is in effect, his recipients will be paid $100,000. However, a permanent life insurance plan is good for the face value of the plan, plus it features a benefits element, meaning it has some money value. The value builds up much like a benefits account–at an annual or adjustable rate of interest, which can be cashed in as it builds up resources.
Because permanent life insurance features not only the potential payment itself, but also the benefits element, it costs significantly more than term life insurance. The difference in cost can be as much as five to 10 times as much as term life insurance. Because term life insurance holds no money value, term life insurance plan is less expensive.
Because permanent life insurance consists of a benefits element, many purchasers consider it a better value than term life insurance because it holds money value. However, due to costs such as insurance company commissions, it may take as much as 10 years for a permanent life insurance plan to actually hold value. Also, the revenue can be much less than other financial commitment means, such as mutual resources or stocks. For this reason, many experts recommend purchasing whole senior life insurance and investing the money you would have spent on whole life in a higher-return financial commitment.
Permanent life insurance plan over 80 is a long-term financial commitment that takes many years to gather significant value. For this reason, it is best purchased by a younger people (provided she could sustain the monthly premiums). Another consideration for permanent life insurance plan is whether or not a people truly need life insurance for the whole of their lives. When a people is older and her close relatives has grown, she may have fewer dependents counting on her for funds–therefore, the may not be needed.
However, in some ways term life insurance policy over 65 is a risk one bets against his life–if he outlives his plan, his recipients receive nothing and the plan no longer has any value.