Term Life or Permanent Life

Term is cheap, but expires. Permanent costs more, but never expires. Depending on your budget and needs one may fit better than the other, or it could be that a blend is the right fit for you.

Term Life Insurance

First, let's talk about term life insurance. I'm a big fan. I'm a fan because it makes something I feel is very important affordable for nearly everyone. I believe the best insurance for you, in general, is the insurance you can afford. If it's too expensive, far too many people let their policies lapse and get nothing. Now, having said, I'm a fan, let me also point out I don't think it's necessarily the best thing for everyone. See, there's a reason it's so affordable. Because a term life insurance policy expires, many of them never have to pay out to a beneficiary. Some sources estimate less than 5% of term policies never pay out a death benefit. That makes sense because the odds of any of us living another 20 years is much greater than the odds of us living forever.

Permanent Life Insurance

On the other hand, permanent policies, like a guaranteed universal life (GUL) policy, is designed to last the lifetime of the insured. The premiums are higher on these in the same way that the premiums are higher on a 30 year term than on a 20 year term. The insurance company is taking more risk therefore charging higher premium. The difference is that with a GUL they are virtually guaranteed to have to pay out a benefit to your beneficiaries. Not much of a chance of you outliving that policy since it's designed to last your whole lifetime! That said, if you're healthy enough and can afford it these type policies offer a ton of value. In some cases you can even set up a universal life policy to build up cash that you can use to supplement your retirement income. It's a great way to get more value out of your life insurance while you're living.

Use Both to Your Advantage

There are also ways to get the best of both worlds. You could get a term policy that converts to a permanent policy. You could get a Universal Life policy that offers term like pricing for a set time and then reduces the death benefit after the set period. Or you could explore having both in place to cover different seasons of life. For example, if you needed a $500,000 policy for the next 20 years while your children are dependent on your income, but still wanted some coverage beyond that, you could get a $300,000 20 year term and a $200,000 permanent. When the term expires, you'll still have the permanent policy for $200,000 set up to last your lifetime.

As with all insurance choices, it's important that you consult a professional. I always recommend an independent agent. Not having a company telling an independent agent which products they have to sell to their clients lets an independent agent really focus on what is best for their client and find them the best possible solution. If you'd like the team at Covenant to help you we would be honored. You can get term quotes on our website or you can request a phone or in person consultation. We're here to help.

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