It is a difficult task in choosing life insurance. In order to make the best decision, you need to take the time to evaluate all facets before making a decision. Life insurance comes in two forms: Permanent and Term Life Insurance.

In deciding what form of life insurance is appropriate for you, information about each type is listed below. Knowing the benefits and pitfalls of each should help in making an informed decision as well.

The concepts of life insurance should be understood first and foremost. To understand these two forms of insurance, try comparing them to renting versus owning a home. Term life is like renting a house. You plan on being there for only a number of years and eventually moving on to something else. Permanent Life Insurance on the other hand, is equivalent to owning your own home where you can live in it forever.

There are many terrific opportunities with each type of insurance. The pro’s and con’s of each type of insurance are noted in greater detail below. Depending on your needs, one form of insurance can be more beneficial than the other.

Life Insurance – Term

Advantages

  • Primary benefit is that it is cost effective. Can be purchased at a far lesser price than permanent life insurance.
  • You are free to drop the term insurance at anytime.
  • Term insurance has a high degree of flexibility. You can add to it and change to a permanent insurance policy quite easily.

Disadvantages

  • There is no monetary value to a term life insurance policy. It represents coverage only. No other incentives are included.
  • If you decide to stop paying on your term insurance, your insurance coverage will cease. Your family will not receive the insurance benefits when you pass away.
  • Pricing for term insurance is at a variable rate. You will pay more and more as you get older with each passing year.

Life Insurance – Permanent

Advantages

  • There is a cash value with all permanent life insurance policies. It is also tax deferred if you receive any cash from it.
  • Risks are low with permanent life insurance. Death benefits are guaranteed to your loved ones regardless of whether you have coverage or not at the time you pass away.
  • Permanent life insurance can help pay for other expenses when you are living. Borrowing on your insurance plan can be done without penalty.

Disadvantages

  • Permanent life insurance is far more costly than term life insurance.
  • If you decide to give up your permanent life insurance coverage, large fine will be incurred which are sustained by law.
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