Term or Permanent Life Insurance?
Few people who have bought life insurance have escaped the debate over term versus permanent insurance.
The wrong kind of life insurance can do more damage to your financial plans than just about any other financial product today. So, the first and most important decision you must make when buying life insurance is: term, permanent or a combination of both?
Term life policies offer death benefits only, so if you die, you collect. If you live past the length of the policy, you get nothing.
Permanent life insurance policies offer death benefits and a "savings account" (also called "cash value") so that if you live, you get back at least some of, and often much more than, the amount you spent on your premium. You get this money back either by cashing in the policy or by borrowing against it.
Permanent life insurance premiums are more expensive than term premiums because some of the money is put into a savings program. The longer the policy has been in force, the higher the cash value, because more money has been paid in and the cash value has earned interest, dividends or both.
The debate is all about that cash value. If you buy a policy today, your first annual premium is likely to be much higher for a permanent life policy than for term.