Benefits and Drawbacks of Term & Permanent Life Insurance
Learn the drawbacks and benefits of life insurance options with Ben Yingling. Not knowing these benefits and drawbacks could cost you big and even leave you uninsured. In 5 minutes you will be prepared to discuss and create your life insurance policy.
What are the benefits and drawbacks of a Term and Permanent Insurance policy?
In this article, we will break down the goods and the bad of Life insurance. Term life insurance and permanent life Insurance have a few pros and cons. Regardless both will provide the security, and relief a family needs.
Term Life Insurance Benefits
- Term life insurance is cheap!
You can get a ton of insurance to protect something like a mortgage for a very low cost. The safety net and price makes it a great fit for young families.
- Term life insurance is easy to understand!
You pay the premium, and they will pay the death benefit for whatever term length that you have. It could be a 10 year, 15 year, or 30 year term. Usually if you’re selecting a term for mortgage protection, it would be the same term of your mortgage.
- Term Life Insurance has flexible options!
So there are many different carriers out there that offer term insurance. It’s not only important to see who’s giving you the best price, but also what are the conversion options. Knowing when to convert your term insurance into permanent insurance is important. Take the time to find that special independent agent who will be there to guide you.
Term Life Insurance Drawbacks
- Term life Insurance doesn’t build any equity.
The first downside of term life insurance is, you’re basically renting your insurance. You are paying the premium, and then they pay the death benefit. You’re not building any equity in that product.
- Less than 2% of Term Life Insurance policies actually pay out.
Insurance carriers know it is unlikely they will have to pay out on a term life insurance policy. This is why it’s so cheap to get a term life insurance policy.
- Term life insurance can be risky when it expires.
After time your premium is most likely going to triple in price. If you do not convert your term life insurance to permanent life insurance. Then if you’re uninsurable for any reason, it could make it very difficult to get life insurance.
Permanent Life Insurance Benefits
- Permanent life insurance doesn’t expire.
As long as you pay you premium. When you die, they’re going to pay the death benefit. Also permanent life insurance premiums are fixed.
- Permanent life insurance is useful for estate planning and cash valued savings.
With permanent life insurance you can build cash. That cash is invested at a fixed interest rate by the insurance company. You can choose variable investments that work much like a mutual fund.
- The cash earned is tax free.
The cash invested is tax deferred in fact, you can use it as a supplement to your retirement. You can use the savings account to pay your premium. You can also increase the cash value limit by increasing the insurance amount.
Permanent Life Insurance Drawbacks
- Permanent life insurance is not cheap.
Permanent insurance can be expensive. Permanent life insurance will most likely be triple the cost of term life insurance.
- Permanent life insurance is not the best tool for investing.
Permanent life insurance is a conservative investment. You will get higher returns investing in the stock market or other products. Remember to treat permanent life insurance as a conservative part of your portfolio
- The cash value you gain overtime needs to be managed.
Making “Over Payments” converts to cash value and once you reach a certain amount. These funds must be available to the policy owner as a cash value if he or she decides to not continue the policy. There can be issues if you invest too much cash with regards to taxation.
Thank you, for learning the benefits and drawbacks of term and permanent life insurance. If you would like to learn more about life insurance please follow this link to our website. (Life Insurance) Find yourself a quality independent agent like Crawford Yingling Agents. Who will shop for the best life insurance policy that fits you.