The Pickle of Term vs. Perm

Nikki Kook- Marketing and New Business Coordinator

Longevity and insurance. What do these have in common?

Although technological and medical advances are wonderful and give us more time with our loved ones, it is leaving many people financially unstable after retirement. In addition, the average retirement age is becoming later and later, and many people’s life insurance is expiring too soon, leaving earned income unprotected.

There are many arguments related to purchasing Term Life Insurance or Permanent Life Insurance. At the end of the day, the decision depends on each person’s specific needs and goals, and it is important to match those needs and goals to Perm, Term or a combination of the two. Term vs. Perm is not a “one-size fits all” pickle.

Term Life Insurance
Term Life Insurance provides your loved ones with financial protection for a specific period of time, or “term”, such as 10, 20 or 30 years. It is great for covering needs that are expected to disappear over time, such as a mortgage, debt and children’s schooling.

Most Term policies have a conversion option to Perm without additional medical examinations, which gives you flexibility as financial needs grow. It is important to look at the strength of the insurance company prior to purchasing. Not all insurance companies are ranked the same nor do they offer all the same benefits, such as converting.

Permanent Life Insurance
Once Term Life Insurance expires, a person may want to purchase more to increase benefits. However, their increased age and decreased health may put the purchase price out of reach.

Permanent Life Insurance provides your loved ones with protection for your entire lifetime, as long as premiums are paid and without additional medical examinations. Some Permanent policies include guaranteed purchase options, which allow you to buy additional coverage without showing additional proof of insurability (health examinations).

Permanent policies accumulate equity called “cash value” on a tax-deferred basis. Policyowners can access this cash value by taking a loan or by selling the policy. In some states, properly directed life insurance proceeds and cash values are protected by creditors and may avoid probate and pass directly to the intended beneficiary. Make certain the policy is from a highly rated financial institution before purchasing to ensure these benefits are available.

The Verdict
Bottom line is a person’s financial needs are ever-changing, so it is best to purchase life insurance with a forward-thinking mindset. Your definition of financial protection will change as you and your loved ones age, so it helps that Perm and Term Life Insurance meet different needs.

Regardless of the Perm vs. Term choice, your loved ones deserve the best protection across all stages of life. This protection should be provided by an insurance company with high financial ratings, which are reviewed by independent rating services.

If an article or advisor answers the “Perm vs. Term” pickle with a one-size fits all solution, be wary.